India loan paralysis to stay as RBI's calls to spur lending fall on deaf ears

Mumbai

INDIAN central bank governor Raghuram Rajan's calls to spur lending seem to be falling on deaf ears as banks focus on surging bad debts and falling capital buffers.

Loans grew 10.7 per cent in the 12 months through Jan 23, near the 9.7 per cent pace seen in September, which was the least since October 2009. The Reserve Bank of India (RBI) lowered the proportion of deposits lenders must invest in safer assets three times since June and cut its repurchase rate last month for the first time since May 2013. Just three of India's 47 commercial banks pared their base lending rates in response.

DBS Bank Ltd says lower borrowing costs are no "panacea" as higher loan-loss provisions make banks cautious, while Standard & Poor's domestic unit Crisil Ltd sees delays in the transmission of monetary easing to faster credit growth. Four of the five la…