MUMBAI, July 10: The new generation private sector banks have reversed the trend of negative credit offtake during the first quarter of the current fiscal. Fuelled by higher export credits, the new private sector banking industry has recorded a 10 per cent growth in credit offtake in April-June 1997.

This is significant against the backdrop of a 0.6 per cent negative credit growth recorded in the entire banking industry.

The only new private bank that recorded a negative growth was Times Bank which saw its advances dropping by nearly 11 per cent over its March figures. The bank also experienced a slump in its deposits. Deposits of the bank dropped by 3 per cent during the first quarter of the year.

Most of the private banks propped up their advances by lending to the export sector. "We have a fairly large exposure to exporters engaged in tea, coffee, spices, ready made garments and jewellery exports. There has been a substantial offtake of credit by these companies during the first quarter which has helped us increase our advances," said S Solomon Raj, managing director of IndusInd Bank. IDBI Bank recorded a 22 per cent growth in its export credit during the first quarter. Though ICICI Bank increased its advances during the first quarter by just 5 per cent, it too achieved this level chiefly on account of credit to the export sector. According to ICICI Bank chairman PV Maiya: "There has been substantial lending to horticulture and fruit exporters during the first quarter".

On the deposits front, IDBI Bank has recorded the highest growth with its deposits growing by over 35 per cent. The bank recorded a 45 per cent growth in its term deposits during the first quarter while savings bank accounts grew by 34 per cent. However, the bank received about Rs 30 crore from another commercial bank by way of a term deposit during this period which helped it in increasing it deposit portfolio to a great extent.

"Post-CRB fiasco, deposits with non-banking finance companies have become a strict `no-no' to most investors who have started shifting the focus to commercial banks. Since private banks offer higher rates of return than PSU banks, they have become an obvious choice," an industry source said.

However, ICICI Bank has witnessed a shift in its depositors' preference. The bank which has recorded 4 per cent deposit growth in April-June has reduced its short-term deposit rates drastically to encourage inflow of long term funds.

Times Bank saw a drop in its deposits mainly on account of a conscious effort by the bank to reduce its dependence on high cost certificates of deposit (CDs). The bank has started doing away with CDs and concentrating on core deposits.

During the fortnight ended June 20, bank credit in all scheduled commercial banks showed a negative growth of Rs 1,586 crore. However, the decline in credit offtake during the current financial year is low compared with the decline in the corresponding period of the last fiscal. Bank advances fell by Rs 4,990 crore during the same period in the previous financial year.

Senior bankers, in a meeting with the Reserve Bank of India governor C Rangarajan, had said that the general slowdown in the economy, substitution of loans with corporate debt and external commercial borrowing and a fear psychosis among bankers were the three main reasons for the poor credit offtake in the current fiscal.

UTI Bank recorded the highest growth during the first quarter with its advances witnessing a growth of 41 per cent. Senior executives of the bank attributed this to the fact that sanctions which were given earlier were availed of during the first quarter. Export credit accounted for a significant portion of the advances.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.