RECOVERY IN THE AIR: Retail loans act as the main driver

A recovery is in the air, if the pick-up in non-food credit is anything to go by. The growth of non-food credit in the first 11 months of 2002-2003 at Rs 1,29,162 crore is the highest in any single year since 1996-97 — and more than double the non-food credit offtake of Rs 49,224 crore seen in the corresponding period of 2001-2002.

What is more, in none of the preceding five years did non-food credit grow at even half the rate of the growth in 2002-2003. In 1996-97, the growth in non-food credit was Rs 23,909 crore; in 1997-98 it was Rs 30,276 crore, in 1998-99 Rs 37,366 crore, in 1999-2000 Rs 48,436 crore; and in 2000-2001 it was Rs 54,749 crore.

Even though the non-food credit figure for the first 11 months of 2002-2003 includes figures of the erstwhile ICICI loan book — ICICI was merged with ICICI Bank last year — the growth in credit pick-up is still unprecedented. The last time the banking sector witnessed a huge credit pick-up was in 1995-96 when interest rates hit the roof because too many companies were chasing too little money.

The major difference between 1995-96 and 2002-2003 is the source of credit pick-up. Last year’s growth was driven largely by retail loans: home loans, car loans, loans for durables and so on.

State Bank of India Chair AK Purwar said there had been all-round growth but the growth in retail loans, which account for about half of SBI’s credit growth, was particularly noticeable. “The infrastructure sector is also borrowing money,” Purwar said.

ICICI Bank managing director and CEO KV Kamath said companies were ready to make fresh investment in certain sectors. Bank of Baroda Chairman PS Shenoy, too, said a distinct credit pick-up was visible in the chemicals, textiles and steel industries. “Some companies are planning fresh capacity expansion,” he pointed out.

Another significant feature of the just-concluded financial year is the decline in food credit by Rs 4,262 crore.

The last time food credit declined was in 1996-97, when it dropped by Rs 2,614 crore. “The drop in food credit is reflective of the slackness in the Food Corporation of India’s procurement programme because of the low growth in the sector,” a banker said.

Overall credit, non-food and food, grew in the first 11 months of 2002-2003 by Rs 1,24,899 crore, or by 21.2 per cent.

Compared to that, the year-on-year growth was Rs 1,38,489 crore (24 per cent). The comparable figure in 2001-2002 was less than half, at Rs 63,137 crore and the year-on-year growth was Rs 68,850 crore. The overall credit growth in the preceding five years is no patch on the 2002-2003 figures.