The Hindu Business Line : Banks fear NPAs may rise in slowdown period

MUMBAI: Bankers on Wednesday feared that their Non Performing Assets (NPAs) are likely to go up and credit growth to moderate in 2009-10 in the face of global financial meltdown.

“If there is a sharper downturn, it can further impact the asset quality...Banks are looking for a lower rate of loan growth this year,” Indian Banks Associations' Chairman, Mr T S Narayanasami, said after a meeting of bankers with RBI Governor, Mr D Sub barao, ahead of annual monetary policy.

Bankers also informed the apex bank that it would be difficult to bring down lending rates unless the retail and bulk deposit rates decline.

“Cost of deposits are still high. This will have to come down first. Then only, the lending rates will ease,” Mr Narayanasami, who also heads Bank of India, said.

State-owned banks are likely to consider a 0.5-0.75 per cent reduction in deposit rates in a period of 2-3 weeks, that is likely to be followed by a 0.5 per cent reduction in lending rates, he said.

“With the RBI slashing its key-rates, banks have sufficient liquidity now,” he said. On the Government borrowing, Mr Narayanasami said, “The RBI manages it (the government borrowing programme) in an extremely efficient way.'' - PTI

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