Bank credit dropped in 1st half of October

Credit in the banking system slipped marginally despite the festive season. Data from the Reserve Bank of India suggests that in the period between October 3 and 17, bank credit slipped 0.7 per cent.

However, in the past one year, credit growth was up 11 per cent. In the period ended October 17, it was Rs 62,20,004 crore, up from Rs 55,97,985 crore a year before.

Though credit demand has been tepid for several quarters, this fortnightly dip came just ahead of the Diwali week, the main festive season for banks. To improve the retail demand, banks have come out with several discounts and offers on both home and automobile loans.

In the previous fortnight, buoyed by festive demand, credit demand had shown a marginal improvement but the momentum could not be sustained, suggests the data.

A senior executive with Punjab National Bank said the dip in deposits and advances in the fortnight after the close of a quarter is normal. The part of business which gets booked in the run-up to a quarter’s end is unwound. The demand for credit remains subdued, though the sentiment has definitely improved, he said.

Rajiv Anand, president-retail banking at Axis Bank, said the sluggishness in growth was not so much on account of retail lending but primarily due to a slowing in the corporate segment of the business.

“Traditionally, from the month of October, that is the second half of the year, we begin to see an uptick in investment demand and that drives the growth in credit offtake. However, this year, corporate demand is yet to pick up and that accounts for the slow growth. We are hoping that in a few months, we will begin to see improved demand from the corporate end,” he said.

Bankers agree there has been some improvement in the corporate segment but a recovery is still a few quarters away. Deposits also declined by about one per cent in the fortnight under review. However, at the end of October 17, on a year on year basis, deposit growth continued to outpace credit growth at 13.6 per cent, to Rs 82,13,873 crore, up from Rs 72,94,861 crore a year before.