Loans and advances of foreign banks operating in India grew 13% in FY19

Loans and advances of foreign banks operating in India rose about 13% to nearly Rs 3.97 trillion in 2018-19 (FY19). This was slightly ahead of the 11% growth in this regard at scheduled commercial banks in general, comprising private, government-owned, foreign, and small finance banks (SFBs).

The loan book of private banks grew at a much higher rate, of 25%. Public sector banks expanded theirs by only 4%. SFBs, a group of recent origin, showed 70.5% growth in loans. Deposits at foreign banks rose 17% in FY19, to Rs 5.8 trillion, from Rs 4.95 trillion the previous year. Their capital base increased to Rs 77,809 crore, from Rs 67,883 crore, a 15% increase, according to the RBI’s report on Trends and Progress of Banking in India 2018-19.

Foreign banks’ borrowings rose to Rs 1.51 trillion in FY19, from Rs 1.3 trillion — an 18% spike. Other assets rose by 67% over the year, to Rs 1.47 trillion. The number of foreign banks did not rise, but the numbers of branches did, from 286 to 299. The RBI adds that two more foreign lenders, SBM Bank and DBS Bank, were issued a licence in December 2017 and October 2018, respectively, and commenced operations as wholly owned subsidiary from December 1, 2018, and March 1, 2019, respectively.

Banks' loans rise 8.8% in two weeks to October 11; deposits climb 9.8%

Banks' loans rose 8.8% in the two weeks ended October 11 from a year earlier, while deposits climbed 9.8%, the Reserve Bank of India's (RBI) weekly statistical supplement showed on Friday. Outstanding loans rose Rs 216.45 billion ($3.05 billion) from a fortnight earlier to Rs 97.88 trillion. Non-food credit climbed Rs 214.40 billion to Rs 97.28 trillion, while food credit rose Rs 2.05 billion to Rs 602.90 billion. Bank deposits grew Rs 310.70 billion to Rs 129.38 trillion.

For agricultural loans, bankers call for longer repayment period

In view of the significant stress in the agriculture sector, bankers at the state-level consultancy meet in Kolkata have called for longer repayment periods for loans under Kisan Credit Card (KCC) from 12 months to 36 or 48 months.

There were also deliberations on allowing farmers to take fresh loans even if they fail to repay the entire loan, as long as they service the interest.

Based on direction from the department of financial services, public sector banks started a three-stage consultation process last week.

 

They focused on nine issues, including digital banking, credit to micro, small and medium enterprises (MSMEs), and agriculture sectors, direct transfer of benefits as well as education loans, among other issues.

This month has seen intra-bank as well as inter-bank meetings to discuss key issues. The final set of suggestions from all the meetings will be sent to the Centre, which will organise a meeting with banks in the first week of September.

“Stress in the agriculture sector is touching double digits and is a phenomenon visible across the banking sector. Bankers are really concerned about the issue,” said Ashok Kumar Pradhan, managing director and chief executive officer (MD & CEO) of United Bank of India, at a press meet in Kolkata last week.

There were also suggestions to have an agriculture credit guarantee scheme, and a stronger institutional network to prevent multiple lending in the agriculture sector.

Some of the suggestions at the branch level also included the need to press the government for digitisation of land records, failing which there had been instances of multiple borrowings.

At the branch-level meet, Rajnish Kumar, chairman, State Bank of India, too, stressed the need to revamp agriculture and MSME lending practices, given the high stress in these sectors.

Bankers have also suggested the need to have a credit guarantee mechanism for the Pradhan Mantri Mudra Yojana (PMMY), the government’s flagship credit scheme for micro and small enterprises. It is another source for a big chunk of the non-performing assets or NPAs.

Among other suggestions, the need for cyber security to promote digital transactions was also discussed. According to Pradhan, the bank would suggest to the government the need to have an umbrella organisation in the sector for protection against cyber frauds. Banks could pool in funds for an organisation to address cyber security concerns, said Pradhan.

The falling share of business of public sector banks in the banking industry was also a cause of worry for banks, he said.

The share of public sector banks in the banking industry has come down from around 75 per cent four years ago to nearly 67 per cent now, with non-banking finance companies cornering a large chunk, he said.