Bank credit goes up on telcos need for licence money

Driven by demand from telecom companies to provide funds for their broadband wireless access (BWA) licence and to meet the end-quarter loan growth target, bank credit went up by Rs 22,343 crore during the fortnight ended June 18.

Bank credit grew by 19.6 per cent on a year-on-year basis as of June 18. The outstanding credit was Rs 33,10, 417 crore on the date. However, deposits mobilised by banks dropped by Rs 23,761 crore during the fortnight. On a year-on-year basis, deposits grew by 13.9 per cent to Rs 45,17,541 crore during the fortnight ended June 18.

“Apart from telecom companies, corporates have also been availing of short term loans. There is a general decline in deposits during the quarter-end when credit offtake picks up,” said a senior executive of a public sector bank. The central bank had projected credit to grow by 20 per cent and deposits by 18 per cent during 2010-11.

With banks focusing more on meeting the demand of credit from companies, growth in deposits has been declining for the past three fortnights.

“Banks have not been aggressive in garnering the deposit and have deployed the surplus for lending during the quarter,” said Karnataka Bank chief financial officer B Jayram Hande.

The total cost of BWA licences was close to Rs 33,000 crore. Apart from banks, telecom companies have accessed markets abroad for funds.