Banks fear rise in NPAs this fiscal

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

Bankers,on Wednesday,expressed fears that non-performing assets (NPAs) are likely to go up and credit growth may moderate in 2009-10 in the face of the global financial meltdown.

“If there is a sharper downturn,it can further impact the asset quality … Banks are looking (at) a lower rate of loan growth this year,” Indian Banks Association Chairman T S Narayanasami said after a meeting of bankers with RBI Governor D Subbarao 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.

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“(The) cost of deposits (is) still high. This will have to come down first. Then only (will) the lending rates ease,” said Narayanasami,who also heads Bank of India.

State-owned banks are likely to consider a 0.5-0.75 percentage point reduction in deposit rates in a period of 2-3 weeks,which 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 Government borrowing,Narayanasami said,”(The) RBI manages it (the government borrowing programme) in an extremely efficient way.”

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