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Post demonetisation, Canara Bank has channelled the huge inflow of deposits to productive sectors such as retail, and micro, small and medium enterprises (MSMEs).
“The funds received have been mainly used for modest credit expansion, especially in retail and MSME lending, and of course, a part was used in investments,” Rakesh Sharma, Managing Director and CEO, Canara Bank, told BusinessLine .
Sharma said post demonetisation “the bank received cash deposits of over ₹70,000 crore. In the same period, taking into account withdrawals, the net increase in current account and savings account (CASA) deposits was over ₹24,000 crore.”
On the outlook for corporate credit, Sharma said credit growth to the corporate sector remains muted.
“Credit growth to major sub-sectors such as ‘infrastructure’, ‘food processing’, ‘basic metal and metal products’ and ‘textiles’ has decelerated.
“Debt overhang, coupled with excess capacity, have been the main reasons for low credit demand from corporates. Many of the bigger as well as new corporates have turned to the bond and debt markets for funding,” explained Sharma.
However, the demand situation is improving slowly, he said. “We expect the effective steps and co-ordinated actions by the Centre and the Reserve Bank of India, coupled with newer reforms, stability of the economy and investor confidence, will lead to improved credit offtake in the corporate sector and overall buoyancy in credit growth during the current fiscal.”
Pitching for lowering the Cash Reserve Ratio (CRR), Sharma said: “CRR increases the transaction cost for us. While recognising that it is an important monetary tool, I am of the view that there is still scope for bringing it down. Alternatively, the RBI can consider a system of paying interest on CRR.”
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