The bank plans to give a push to project-funding and term loans to lift its sagging credit offtake. The bank's fund flow to corporates through subscription to commercial paper, preference shares and non-convertible debentures has also come down from Rs 2,000 crore in March to Rs 600 crore in September, sources said.

However, despite the slowdown in its flow of funds to the commercial sector, the bank has been able to step up its year-on-year average credit growth to over 12 per cent this year, up from 8 per cent in 1997-98.

"Even though incremental growth in vanilla credit is negative this year, the bank will show handsome growth in interest income as the average credit growth is on thehigher side," a bank executive said. Last year, the bank had registered a fall in its interest income in between April and September. Insiders have attributed the negative credit growth to the industrial slowdown. "Despite higher sanctions and increase in limits, corporates are not drawing loans. None of the big infrastructure projects has achieved financial closure as yet. We are now focusing on project-funding and term lending in a big way to lift credit offtake," sources said. In 1997-98, the bank had cut its credit growth target from 16 per cent to 13 per cent in the face of economic slowdown. This year, however, it has retained the target at 16 per cent. "We are confident of achieving the target by the end of the year. Even though big corporates are not drawing loans, we are focusing on the personal loan segment like mortgages. We are also targeting the trade, transport and service sector as growth areas," sources said.

The bank had disbursed Rs 2,000 crore to corporates by way of subscription toinstruments like commercial paper, debenturess and preference shares last year. "There is a shift in the strategy. Last year the spread was under pressure as the interest rates on commercial paper and non-convertible debentures were extremely fine, and we focused on volume-driven business. This time we are exploring other avenues to boost credit," sources said.

The negative credit growth is in line with the trend in the banking industry. Non-food credit went up by a paltry Rs 459 crore in the first half of the current fiscal. Even this rise was triggered off by a substantial credit growth--to the tune of Rs 4,258 crore--in the last fortnight of September.

Despite the industrial slowdown, the bank's quality of assets has not suffered. "The net non-performing assets level, which was pegged 6.07 per cent in March, has not slipped further. Even if the Reserve Bank tightens the NPA norms (making non-payment of one quarter interest makes an asset sub-standard), the bank's net NPA level will go up by 1percentage point," the executive said.