Credit growth at a 12-year low of 10.75%

Low demand for loans pushed credit growth to a 12-year low of 10.75 per cent during the year up to October 9.

The previous low of 9.78 per cent was during the fortnight ended November 11, 1997.

According to the latest fortnightly data released by the Reserve Bank of India (RBI) this evening, during the fortnight ended October 9, 2009, bank credit grew Rs 17,160 crore. Bankers said a part of the increase was during the last four days of September, when banks tried to meet their second-quarter targets for sanctioning and disbursing loans.

In contrast, after the credit crisis intensified in September last year, banks lent Rs 64,937 crore during the fortnight ended October 9, 2008. At the end of October 9, 2009, outstanding bank credit was estimated at Rs 28,90,315.74 crore, as against Rs 28,73,155 crore in the previous fortnight.

The present level of credit growth is nearly half the RBI’s projection of 20 per cent for the year ending March 2010. The central bank, which is due to present the second quarter review of the monetary policy on Tuesday, is expected to revisit the projections in the wake of the low demand for funds from the corporate sector. During the pre-policy meeting, bankers had told RBI that it would be difficult to clock a 20 per cent credit growth.

Bankers said that with companies raising equity capital to deal with the high leverage levels, the demand for loans had dropped. In addition, few companies were planning expansions as they had surplus capacity to deal with the present level of demand.