BANKERS COUNTER RBI ON RISK AVERSION

In a direct response to the Reserve Bank of India Governor Shaktikanta Das' statement today that low credit growth is due to risk aversion by banks, a panel of bankers hit back saying that they are not risk averse but prudent in their lending, and that muted loan growth is also owing to low demand for credit.

Bankers said that given the experience of weak asset quality, banks don't want to be aggressive on lending in a period of low economic growth, only to have their non-performing loans pile up over the next few years. "...no banker is risk averse because we are in the business of lending.

If we raise deposits, and do not lend, from where we will make the profit...but certainly we have to manage the risk in the better quality way.

In the past, we may have given disproportionate advances to certain industries, and so the risk management part every banker will do," IDBI Bank Managing Director and Chief Executive Officer Rakesh Sharma said.

Union Bank of India Managing Director and Chief Executive Officer Rajkiran Rai G. said that it is not that loan sanctions have gone down, but it is the lack of demand for fresh credit that is also hitting loan growth in the country.

He added that utilisation of sanctioned working capital lines is currently much lower compared with usual levels.

Sharma said that growth was "very good" till March, but has been hit thereafter, which also implies that there isn't much demand. "...it is outstanding credit which is monitored which is showing lower growth.

The new investment credit should come. Banks are eager to lend where there is sufficient certainty of cash flows and the counter-party where we get a confident," Rai said.

Axis Bank Managing Director and Chief Executive Officer Amitabh Chaudhry said banks are quite comfortable with this conservative strategy. However, because credit growth for the overall economy has come down, and banks have tightened their standards, we might see growth tapering off for the industry.”

Bankers said given the weak asset quality, they don't want to be aggressive on lending in a period of low growth