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| Credit growth up as quarter draws to close |
| BS Reporter / Mumbai Sep 24, 2009, 00:00 IST |
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High-base effect behind 13.24% rise in credit flow in fortnight ended September 11.
 The credit growth during the year up to September 11 fell 13.24 per cent, mainly due to the high base effect and banks pushing loans to meet their quarterly targets. In the corresponding period last year, credit flow had risen 26.1 per cent on a year-on-year basis.
Bank credit went up by Rs 18,374 crore to Rs 28,25,957 crore during the fortnight ended September 11, 2009. During the same fortnight last year, bank advances had grown by Rs 32,914 crore.
According to data by the Reserve Bank of India (RBI), the rise was mainly due to growth in non-food credit as food credit dipped to Rs 1,339 crore during the fortnight. Bank credit has grown by Rs 50,407 crore during the financial year so far as against a growth of Rs 1,29,334 crore in the corresponding period last year.
Last week, at a meeting with RBI Governor D Subbarao and Deputy Governor Usha Thorat, chief executives of banks had said that the credit off-take would grow 20 per cent by the end of the financial year. The interest rates, however, would stay steady for the next few months, but might rise towards the end of the financial year, they said.
Banks will have to disburse an additional Rs 5,16,400 crore between September 2009 and March 2010 to meet the year-on-year credit growth projection of 20 per cent. In this fiscal so far, credit disbursal has grown 1.35 per cent over the figure at the end of the previous financial year.
“A large number of sanctions are at advance stages of documentation. We have seen a surge in demand in the last one month,” said Bank of Maharashtra Executive Director MG Sanghvi. The bank is targeting a growth of 5-6 per cent over March in its loan book for September 2009. It is looking at 20 per cent growth for 2009-10.
“The growth is partly because of banks pushing loans to meet their targets for the quarter, which is coming to a close. The demand for short-term loans has pushed up the off-take as the demand for long-term loans is missing,” said Bank of India Executive Director BA Prabhakar.
The public sector lender has increased its loan book by 1-1.5 per cent in the first half but expects to grow 18 per cent by the end of the financial year. Prabhakar expects credit demand to pick up in the second half as companies engaged in procuring food and agriculture products take loans.
Meanwhile, during the fortnight, deposits mobilised by banks went up by Rs 8,122 crore to Rs 40,89,791 crore, mainly due to a sharp rise in term deposits. The demand deposits dropped by Rs 10,837 crore while term deposits rose Rs 18,960 crore. On a year-on-year basis, the deposits went up by 20.19 per cent at the end of September 11.
As a result of a significant growth in credit, banks’ investment in government securities or instruments that qualify for the statutory liquidity ratio requirements dropped Rs 21,296 crore to Rs 13,48,191 crore during the fortnight.
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