The deceleration in public sector banks' credit growth has impacted the overall credit expansion of scheduled commercial banks in FY12, according to the Reserve Bank of India.
PSBs accounted for around three-fourths of the outstanding bank credit of Rs 46,11,600 crore as on March 23, 2012.
Year-on-year, PSBs' credit growth decelerated to 16.3 per cent in FY12, against 21 per cent in FY11. The 26 PSBs collectively recorded a credit offtake of Rs 4,75,200 crore (Rs 5,06,300 crore in FY11).
Year-on-year, private sector banks' credit growth decelerated to 19.7 per cent in FY12, against 24.7 per cent in FY11. The 20 private sector banks collectively recorded a credit offtake of Rs 1,43,400 crore (Rs 1,44,400 crore in FY2011).
Year-on-year, foreign banks credit growth decelerated marginally to 18.5 per cent in FY12, against 18.6 per cent in FY11. The 36 foreign banks collectively recorded a credit offtake of Rs 36,600 crore crore (Rs 31,000 crore in FY11).
“Credit growth decelerated across bank groups during 2011-12. Since public sector banks account for around three-fourths of the outstanding credit, the deceleration in their credit growth impacted the overall credit expansion of scheduled commercial banks taken together,” said the RBI's report on Macroeconomic and Monetary Development.
Corporate debt
The RBI observed that increasing stress in the corporate sector was reflected in the quantum jump in the corporate debt that came up for restructuring before the Corporate Debt Restructuring Cell during 2011-12.
Banks tend to become risk averse as corporate profitability impinges on the health of their balance-sheets and the possibility of adverse selection increases in a rising interest rate environment, it added.
The deceleration in year-on-year non-food credit growth as at end-February 2012 was contributed by all sectors — agriculture, industry, services and personal loans.
The deceleration was particularly sharp in agriculture, real estate, hotels and restaurants, professional services, telecommunication, power, cement, textiles, iron and steel and personal vehicle loans.
Reflecting the deceleration in growth and the introduction of system-driven identification of NPAs (non-performing assets) by PSBs, their asset quality deteriorated sharply during 2011-12 (up to December).
Further, the capital to risk-weighted assets ratio (CRAR) of commercial banks, particularly, nationalised banks, declined during 2011-12 (up to December).
These factors appear to have a bearing on their capacity to extend credit.