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State Bank of India aims to increase retail lending

State Bank of India said on Friday it aims to double the value of its new retail loans this fiscal year to Rs 60 billion by tapping the country's fast-growing personal banking business.

"We expect retail lending to push credit growth this year, particularly with corporate lending sluggish," Janki Ballabh, the bank's chairman, told reporters on the sidelines of a press conference on Friday.

SBI, the country's largest commercial bank, expects the slowdown in industrial growth to continue to hurt its loans business in the current financial year, Ballabh said.

SBI reported just a 15 per cent growth in overall loans disbursed in 2000-01, and its chairman said this figure would not increase this year.

In good years, the banking sector has seen credit growth of over 20 per cent, but Ballabh said he expected credit demand to remain low for most banks this year.

"There is not much fresh investment (by companies)," Ballabh said. "There is a slowdown in the capital goods sector in particular because of the industry slowdown."

Central bank data showed that bank credit has grown by just 1.2 per cent to Rs 5.15 trillion from the beginning of this fiscal year up to May 25.

In the month to May 25, credit offtake actually declined.

Industrial output growth fell to 2.7 per cent in April from 6.5 per cent a year ago. Growth in the manufacturing sector, a key driver of industrial output, fell to 2.7 per cent in April from 7.1 per cent.

RETAIL BUSINESS

While global banks like Citibank, HSBC and Standard Chartered have been going after the retail business for at least a decade, state-owned banks have joined the bandwagon only in the past few years.

But over the last three years SBI has stepped up its lending to this sector with total retail loans made until the end of March totalling 140 billion rupees, its chairman said.

Over a five-year period, Ballabh said he expected retail loans to comprise around 20 per cent of total loans. This year's target of 60 billion is 15 per cent of the total.

SBI's shares closed down 0.9 per cent at Rs 210.50 on the Bombay Stock Exchange on Friday, while the benchmark index closed down 2.34 per cent.

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