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| Bank credit dips Rs 25k cr in second fortnight of FY10 |
| BS Reporter / Mumbai May 07, 2009, 00:52 IST |
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But bankers term decrease as aberration at end of every fiscal.
Bank credit declined by Rs 25,266 crore during the second fortnight of the current financial year ended April 24.
But bankers have termed the decrease as aberration that follows the push for meeting targets at the close of every financial year, even as they become busy carrying out audits for the year gone by (2008-09).
According to the latest data by the Reserve Bank of India (RBI), bank credit stood at Rs 27,46,175 crore at the end of April 24, 2009 as against Rs 23,25,134 crore in the corresponding period last year.
| CREDIT CRUNCH |
| Fortnight |
Credit flow
(Rs cr) |
Y-o-Y growth
(%)* |
| Jan. 2 |
14,468.0 |
24.0 |
| Jan. 16 |
-13,837.0 |
22.1 |
| Jan. 30 |
-8,822.0 |
19.3 |
| Feb. 13 |
10,445.0 |
19.5 |
| Feb. 27 |
21,307.0 |
18.3 |
| Mar. 13 |
22,423.0 |
18.1 |
| Mar. 27 |
79,499.0 |
17.3 |
| Apr. 10 |
1,429.0 |
18.8 |
| Apr. 24 |
-25,266.0 |
18.1 |
* At the end of fortnight
Source: RBI |
During its annual policy, RBI had revised the credit growth target to 20 per cent. Bank credit grew at 18.10 per cent on a year-on-year basis on April 24, 2009. The central bank has given enough signals to banks to bring down lending rates and disburse the surplus funds in the system.
RBI has also closed the second LAF as banks have been parking surplus funds amounting to as high as Rs 1,40,000 crore through the reverse repo window with an interest rate of 3.25 per cent.
Bankers had expected the apex bank to cap the reverse repo window during the annual policy on April 21, but RBI had adopted a wait and watch policy. With banks continuing to park huge amounts, it has finally closed the option, effective Wednesday. On Tuesday, RBI had even rejected a bid worth Rs 5,000 crore.
“The central bank should have enough securities to absorb the excess liquidity. It is very likely that RBI may have run out of securities, which led them to reject the bid,” said a senior bank executive.
After rejecting the bid, the central bank announced the closure of the second LAF. Bankers say that a cap on the limit parked in the reverse repo may be next on the cards of the regulator.
“The withdrawals have been lower compared to the sanctions as projects are kept on hold,” said a senior executive of a large public sector bank.
He added that banks are still risk-averse to a few sectors, including real estate, and are concerned about advances turning bad. Although banks lend to corporate at below prime lending rates, off late companies have been raising funds by soliciting fixed deposits from the public.
For instance, Tata Motors mopped up Rs 2,000 crore from fixed deposits. During the fortnight under review, deposits fell by Rs 21,956 crore to Rs 39,01,048 crore on April 24, 2009, against Rs 39,23,005 crore at the end of April 10, 2009.
On a year-on-year basis, deposits grew by 22.54 per cent at the end of April 24, 2009. Demand deposits, or deposits with a tenure of less than a year, dropped by Rs 9,583 crore whereas time deposits went up by Rs 31,494 crore.
Banks’ investments in government securities fell by Rs 12,359 crore to Rs 12,35,460 crore on April 24, 2009 as compared to Rs 12,47,819 crore a fortnight earlier on April 10, 2009, as a result of the drop in deposits.
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