A day after the Budget, bankers met top RBI officials, including governor D Subbarao and three deputy governors (Usha Thorat, Shyamala Gopinath and KC Chakrabarty) to take stock of the current situation and offer suggestions for the forthcoming first quarter review of annual credit and monetary policy in July. They discussed a range of issues like non-performing assets, government borrowing programme and infrastructure finance. Earlier this year, the RBI had announced the loan restructuring facility in certain sectors facing a slowdown like real estate up to June 30.

Bhatt said the RBI's deadline for restructuring of accounts by banks ended by June 30. "But in the case consortium lending where there are dozens of banks, the process is taking a lot of time because bankers have to meet and they have to go back to their management committees or boards. On the other hand, borrowers too have to go to their management on the issue. So, in some cases, the processes cannot be over by June 30, though the process has already commenced.

“So, there was a request that some more time could be given and it would be better if the time was extended until December as in the case of agricultural relief which the government has already done.”

Bankers also said there was not much credit growth in the system. “At least, during the first quarter of this year, there is not much credit growth. The consensus is that there are signs available in the economy. Despite business activities improving across multiple sectors, economic activities are not showing up in bank lending. But more credit growth will take place now than the last quarter and in the second half of the year, it is going to be much, much better,” Bhatt said.

Bankers were of the opinion that though currently, there is liquidity overhang in the system, it would be all sucked out once government borrowing programme — which is quite large during the year — begins and possibly strain the system. Bankers are in favour of consensus on the time and overall management of borrowing programme.

However, they urged the RBI to manage government borrowing in a phased manner so that there is no pressure on interest rates. By and large, it should be possible to manage it in a manner that it will not pose any huge stress on the system. Leading bankers who met the RBI officials included SBI chairman OP Bhatt, ICICI Bank MD Chanda Kochhar, Canara Bank CMD AC Mahajan, Neeraj Swaroop and IDBI Bank CMD Yogesh Aggarwal.

INTEREST RATES MAY HARDEN

MUMBAI: State Bank of India chairman OP Bhatt said interest rates could rise when credit growth picks up in the system. At the moment, the interest rate scenario is very soft. "For some industries and some players, it could see further softening, which could take place. But down the line, when credit growth picks up and when all the borrowings take place, either it would stabilize there or it may even harden a little bit,'' he said. Yogesh Aggarwal, CMD, IDBI Bank said that there are two kinds of interest rates. "While 10-year G-Sec yield will go up with market borrowings, interest rates on credit growth is essentially a function of demand and supply. So much of liquidity is there in the market right now and no much credit offtake was happening. So, I don’t see interest rates rising further on the credit side,'' he said.

MUKHERJEE TO MEET RBI BOARD ON JULY 11

NEW DELHI: Finance minister Pranab Mukherjee who will address the Central Board of Directors of the Reserve Bank on July 11 is expected to discuss the government's borrowing programme and other issues. The Finance Minister is likely to discuss the macro economic picture as well as the interest rates in his post-Budget customary meeting with the Central Board of Directors. Mukherjee is also expected to discuss ways and means of facilitating the government’s large borrowing programme.