Take the pledge to vote

For a better tommorow#AajSawaroApnaKal
  • I agree to receive emails from News18

  • I promise to vote in this year's elections no matter what the odds are.
  • Please check above checkbox.


Thank you for
taking the pledge

Vote responsibly as each vote counts
and makes a diffrence


Issued in public interest by HDFC Life. HDFC Life Insurance Company Limited (Formerly HDFC Standard Life Insurance Company Limited) (“HDFC Life”). CIN: L65110MH2000PLC128245, IRDAI Reg. No. 101 . The name/letters "HDFC" in the name/logo of the company belongs to Housing Development Finance Corporation Limited ("HDFC Limited") and is used by HDFC Life under an agreement entered into with HDFC Limited. ARN EU/04/19/13618
LIVE TV DownloadNews18 App
News18 English
News18 » Business
2-min read

Bankers Doubt Meeting PM Modi's $5 Trillion GDP Target, Say Credit Demand Should Double in Five Years

However, given the bleeding balance sheet of all banks it is highly doubtful if banks have the balance sheet capacity to meet such a spike in demand if at all it were to happen.


Updated:August 19, 2019, 9:29 PM IST
Bankers Doubt Meeting PM Modi's $5 Trillion GDP Target, Say Credit Demand Should Double in Five Years
A representative photo. (Courtesy: Moneycontrol.)

Mumbai: Credit growth will have to increase "substantially" to over 20 percent annually if the economy were to achieve Prime Minister Narendra Modi's USD 5-trillion goal by 2025, warned bankers.

The deepening slowdown, as seen in various sectors of the economy led by plunging consumption-- be its automobiles or even consumer goods--makes a case for more attention, Sunil Mehta, managing director of the state-run lender Punjab National Bank, who also heads the industry lobby IBA, said at the annual Fibac here Monday.

"We can make it (USD 5 trillion GDP goal) in five years, but will require a lot of enablement because we have seen the slowdown in many sectors. The pace of growth in credit is quite low and to reach the target, we need to grow substantially," he said.

"For the next five years, the credit system needs to grow more than 20 percent each year then only that the USD 5 trillion GDP goal can be achieved," Mehta said, adding that means credit supply must nearly double to Rs 188 trillion from Rs 98 trillion crore at present.

However, given the bleeding balance sheet of all banks it is highly doubtful if banks have the balance sheet capacity to meet such a spike in demand if at all it were to happen.

Also, the system-wide bad loans are still in double-digits and bringing them down to a saner level looks a distant dream for the lenders given the pathetic progress in the resolution process at the nascent bankruptcy courts.

It can be noted that of the close to 1,900 companies admitted for bankruptcy resolution only around 50 have been resolved successfully that too with a huge haircut to banks while a couple of hundred have been liquidated leaving big holes in banks' balance sheets.

It can be noted that in FY19 credit growth stood at a low 13.24 percent, which though was higher than around 8 percent in FY18 and 5.4 percent in FY17, which was a five-decades low. The country's largest lender SBI has said it expects credit growth to slow down to below 14 percent in FY20 due to subdued demand.

It can be noted that real GDP growth slowed to a five-year low of 5.8 percent for the March quarter and is widely expected to sink further in the June quarter.

The RBI has done a downward review of its FY20 GDP growth estimate to 6.9 percent, but more downward risks. Mehta said the overall outstanding credit needs to nearly double to Rs 188 trillion if it were to be a USD 5 trillion economy, as against the Rs 98 trillion crore now.

It can be noted that the economy depends on the banking system for the bulk of its credit requirements, especially in the absence of robust corporate bond markets. The banking system's importance has only grown in the past years because of the troubles with the shadow banks on liquidity issues.

Meanwhile, consultancy firm BCG's senior partner Saurabh Tripathi said credit will have to grow at 18 percent every year to achieve Modi's goal.

He said despite the difficulties, the shadow banks are needed and are "here to stay", pointing out that 40 percent of the incremental systemic credit requirements were met by this sector in the last few years.

Get the best of News18 delivered to your inbox - subscribe to News18 Daybreak. Follow News18.com on Twitter, Instagram, Facebook, Telegram, TikTok and on YouTube, and stay in the know with what's happening in the world around you – in real time.

Read full article
Next Story
Next Story

Also Watch

Most Active
Company Price Change %Gain
HDFC 2,049.30 3.78
Maruti Suzuki 6,591.95 10.39
ICICI Bank 417.50 7.99
HDFC Bank 1,199.60 8.95
Reliance 1,254.35 6.39
Company Price Change %Gain
Astral Poly Tec 1,213.70 5.25
HDFC 2,052.10 3.92
SBI Life Insura 815.85 1.73
Zee Entertain 301.10 -2.49
Maruti Suzuki 6,585.25 10.89
Top Gainers
Company Price Change %Gain
Eicher Motors 17,860.20 13.38
Hero Motocorp 2,862.90 13.06
IndusInd Bank 1,419.60 10.71
UltraTechCement 4,269.65 10.43
Maruti Suzuki 6,591.95 10.39
Company Price Change %Gain
Hero Motocorp 2,866.50 13.19
Maruti Suzuki 6,585.25 10.89
IndusInd Bank 1,419.60 10.74
Bajaj Finance 3,705.60 10.19
SBI 301.70 10.09
Top Losers
Company Price Change %Gain
Power Grid Corp 196.20 -2.46
Zee Entertain 301.40 -2.41
Infosys 805.00 -1.91
TCS 2,065.45 -1.74
NTPC 119.85 -1.52
Company Price Change %Gain
Power Grid Corp 196.35 -2.39
Infosys 805.10 -1.94
TCS 2,065.60 -1.74
NTPC 119.90 -1.52

Live TV

Countdown To Elections Results
To Assembly Elections 2018 Results