State Bank, the largest bank in the country, anticipates a 14-15% increase in its loan disbursement for the current financial year based on the current rate of economic growth, as stated by bank chairman Dinesh Kumar Khara. Typically, loan demand surpasses the sum of the country's GDP growth rate and inflation rate by two to three percentage points.
Khara, in an interview with a news agency, projected that the bank could achieve a growth rate of approximately 14% or higher by 2024-25. The 14-15% credit growth rate also relies on the lending opportunities accessible to the bank. Khara emphasized that State Bank's growth at this pace would be satisfactory, given its risk management capabilities. Khara elucidated that the significant increase in interest rates on deposits is unwarranted as State Bank witnessed an 11% growth in deposits last year.
This growth, coupled with the increased SLR investments made by the bank, ensures that there is no necessity to raise interest rates on deposits to meet the desired loan-to-deposit ratio. The bank's SLR ranges from Rs 3.5 lakh crore to Rs 4 lakh crore, exceeding requirements, while the loan-to-deposit ratio stands at approximately 68 to 69 percent.
Khara highlighted that there is ample room for credit growth without resorting to interest rate hikes to attract deposits. Khara acknowledged the need for improvement in State Bank's deposit growth rate, aiming for an increase of at least 12-13% in the financial year 2024-25. Recently, the bank raised interest rates on specific short-term fixed deposits by 75 basis points, equating to a 5% increase.
Although State Bank's Gross Non-Performing Assets (Gross NPA) decreased to 2.24%, a 54 basis points improvement from the previous fiscal year, and the Net Non-Performing Assets (Net NPA) ratio ameliorated by 10 basis points to 0.57% by March 2024, predicting future trends in this area remains challenging. Khara noted that this aspect is heavily influenced by the overall economic environment, making it difficult to forecast accurately.
