The Hindu Business Line : Private banks ahead of PSBs in advances

EVEN as credit growth is showing signs of picking up, private sector banks are continuing to register larger growth in advances compared to public sector banks.

During the period between March and December 2003, private sector banks recorded an average growth of about eight per cent compared to the average two per cent growth registered by scheduled commercial banks as a whole.

Public sector banks excluding State Bank of India, have recorded a growth of about 5.4 per cent. Given the two per cent growth for scheduled commercial banks, advances growth in SBI appears to have faltered during the year.

SBI expected an advance growth of about 16 per cent for 2003-04. But growth in average advances for the nine-month period ended December 2003 was only about 9.3 per cent.

According to Mr. R.V. Shastri, Chairman and Managing Director, Canara Bank, private sector banks are able to do well because of their focus on retail loans. Public sector banks have to focus on infrastructure and corporate sector as well.

According to him, repayments also reduce loan growth. Canara Bank is expected to record a 35 per cent growth in disbursements while growth in loan book would only be about 15 per cent in 2003-04.

Mr Shastri indicated that when corporate and infrastructure advances pick up, public sector banks stand a chance of outperforming private sector banks. Prudential exposure norms on advances will favour public sector banks because of their larger size. This will help them take advantage of any pick up in industrial credit.

Interestingly, Vijaya Bank, one of the smaller public sector banks, has been able to match the private banks in advances growth.

According to Mr M.S. Kapur, Chairman and Managing Director, focus on retail products is behind the robust growth in its advances. Retail products accounted for more than 60 per cent of incremental growth in advances.

The bank wants to ensure that retail products accounted for 50 per cent of advances by the end of March 2005. Vijaya Bank expects a 30 per cent growth in advances for the year ended March 2004.

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