Indian banks have sacrificed their profit margins to extend cheap credit to companies, said M V Nair, chairman of Indian Banks' Association (IBA) at a press meet on Monday, prior to the Federation of Indian Chambers of Commerce and Industry (FICCI)-IBA conference scheduled next week.
According to Nair, the cost of borrowing as a percentage of gross profit for the companies were at an average of 35 per cent in the third quarter, in the fourth quarter it came down to 23 per cent, evidence of cheaper availability of loans.
''Loans to companies by public sector banks have risen 50 per cent between October 2008 and May 2009, compared to the corresponding period earlier, while the cost of capital for companies has come down significantly,'' Nair said.
In the October 2008-May 2009 period, public sector banks sanctioned loans worth Rs7,67,026 crore, as against Rs5,40,079 crore in the corresponding period last year.
However, Nair said the this was not as per expectations.
On a year-on-year basis, average loan growth in the banking industry is expected to be around 15 per cent in 2009-10 against an average growth of 26 per cent in the previous financial year, Nair said.