Despite of demand moderating at the present time, the Indian public sectors banks are planning to target an increased credit growth for the next fiscal year.

The credit growth target for the current fiscal is set at 24% and further the government is eager to increase the flow of credit in order to maintain growth in the economy.

As per the data released by the Reserve Bank of India (RBI), public sector banks have recorded 29% increase in the credit flow in the first three quarters the fiscal as compared to 20% growth for the same period, last year. This rise was registered regardless of the liquidity crunch that was intense during the period under review. On the other hand foreign and private sector banks reported a fall in the credit flow during the same period.

The economic meltdown during the past few months has had severe impact in the credit flow to the different sectors of the industry. For instance the credit outflow to housing and automobiles sectors declined drastically due to the slowdown.

The demand has been constantly declining following which the credit flow did not improve. A bank chief said that the demand would not rise until the prices come down. However the wholesale price-based inflation rate has reduced in the recent weeks but the consumer prices are still high and prices have not yet soften.

Considering all these facts, the PSU banks are still aiming for a greater flow of credit. Bank of Baroda Chairman and Managing Director, MD Mallya said, "We have already exceeded our credit target for this year and we will be able to maintain the same level for next year as well."

Bank of Maharashtra's Managing Director, Allen Pereira said, "We will definitely consider increasing our credit growth target for next year. We have already achieved our target for the current year."

Recently the PSU banks have also been asked by the Reserve Bank of India to increase the credit flow to the cash-strapped micro, small and medium enterprises (MSMEs).