Bank credit shrinks in fortnight to April 23

Indicating a fall in business activity at the start of the new financial year, bank credit shrunk in the first fortnight ended April 23.

Outstanding credit of commercial banks declined by Rs 26,483 crore, from Rs 32,41,224 crore to Rs 32,14,741 crore at end of April 23, according to Reserve Bank of India data.

Bankers said business activity was low key, as new financial year has just begun. Also, many short-term corporate loans disbursed in February and March to meet year-end target have matured. This is partly responsible for drop in outstanding credit.
 

DOWNWARD MARCH
Fortnight- ended	Credit flow  (Rs cr)	Y-o-Y  growth (%)*	Deposit  mobilised (Rs cr)	Y-o-Y growth (%)*
Mar-12	35527.00	16.04	39612.00	18.14
Mar-26	1,15, 548

16.74 83330.00 17.01 Apr 9,’10826.0017.0043501.0016.00 Apr 23, ’10-26483.0017.13-23327.9014.97 * At the end of fortnight                                             Source: RBI

The deposit base of commercial banks also declined in the fortnight. Outstanding deposits as on April 23 stood at Rs 45,06,746 crore, down Rs 23,328 crore a fortnight ago. Demand deposit, a short-term investment avenue, declined by Rs 20,833 crore, while time deposit also dipped by Rs 2,493 crore. Investment activities also slowed in the reporting fortnight. Bank investments were down by Rs 17,169 crore to Rs 14,37,362 crore. A senior IDBI Bank official said this was a trend usually observed at the beginning of a financial year. The drop in outstanding deposits and advances may continue till mid-May.

As companies firm up business plans, withdrawls are expected to go up. Most banks have reported huge growth in loan sanctions in 2009-10. The pipeline of loans, especially to the infrastructure sector, is particularly strong.

Oil marketing companies, which are feeling pressure due to under-recoveries, are expected to increase borrowings in the first quarter. These companies are feeling the pinch of rising global crude oil prices, as they have to pay more but are unable to pass the burden to consumers.