Credit growth slows after quarter-end spurt

After swelling to a nine-month high in the previous fortnight, the outstanding credit of Indian banks decreased by Rs 11,898 crore in the 15 days up to January 15 — its first fall in two and half months.

Outstanding credit of Rs 3008,908 crore as on January 15, 2010, was 13.88 per cent higher than the figure on the corresponding date last year.

Bankers said the fall in credit was expected after the unusually high growth in the previous fortnight. The picture is yet not clear and banks will have to observe the trend for another fortnight to say if the credit pick-up is on firm ground.

In the fortnight up to January 1, banks had extended a whopping Rs 79,515 crore of loans, which, according to bankers, was unusually high even by quarter-end standards.
 

CALMING DOWN
Fortnight- ended	Credit  flow	Y-o-Y  growth	Deposit  mobilised	Y-o-Y  growth
Aug.14	-5,062.00	14.90	9,338.00	21.80
Aug.28	5,612.00	14.09	21,616.00	20.51
Sep. 11	18,374.00	13.24	8,123.00	20.19
Sep.25	47,197.00	12.62	30,215.00	19.79
Oct. 9	17,160.00	10.75	41,347.00	19.98
Oct. 23	-21,750.00	9.65	8,408.00	19.02
Nov. 6	23,147.00	9.78	14,360.00	18.55
Nov. 23	7,057.00	10.08	18,617.00	19.03
Dec. 4	20,930.00	10.50	17,713.00	18.32
Dec.18	21,593.00	11.25	-21,873.00	17.84
1-Jan	79,515.00	13.70	82,769.00	17.60
15-Jan	-11,898.00	13.88	-21,966.00	16.84
Note: Figures in Rs crore, Y-o-Y growth (%)  at the end of fortnight Source: RBI

BA Prabhakar, executive director at Bank of India, said, “We try to recover interest at the end of every quarter. There may be small pick-up in credit growth, but real demand has not come back. Looking at the total credit base of Rs 30 lakh crore, the decline is marginal.”

Banks usually beef up their credit and deposit bases in the last month of a reporting quarter to reach quarterly targets.

A top official with Punjab National Bank said if the credit pick up remained stable for another 15 days, then it would be prudent to say that the growth in demand for loans was on a firm wicket.

“High uptick in credit as well as deposit mobilisation in the previous fortnight is responsible for the drop in the growth this fortnight. It is mainly due to adjustment made by banks at the end of the quarter,” said a senior executive of private sector lender Axis Bank.

In the current fortnight, deposits showed a similar trend as credit, growing at its slowest pace since March 13, 2009.

Banks shed Rs 21,966 crore worth of deposits in the first 15 days of January to a total outstanding of Rs 4242,573 crore.

With the stock market improving until the middle of January, the demand deposit, or deposit with less than one-year tenor, has shrunk by Rs 25,334 crore during the fortnight. At the same time deposit or deposit with more than a year tenor went up by Rs 3,368 crore in the fortnight ended January 15.

“There has been a shift from savings account to equity markets and mutual funds. This shift will continue for some more time, as the returns on market investment have become attractive. But Casa (current account and savings account) will continue to grow. Banks will emphasis on improving the share of low-cost deposits,” said a senior bank executive of a large public sector bank.

As a result of the drop in deposit mobilisation, banks’ investment in government securities, or the instruments that qualify for statutory liquidity ratio, declined by Rs 32,641 crore to Rs 13,80,157 crore in the fortnight ended January 15.