Reflecting the signs of slowdown in the economy, bank credit grew by just 0.1 per cent in the fortnight ended December 19 as against 0.4 per cent in the previous 15 days.
The outstanding credit stood at Rs 26,44, 528 crore.
During the last few weeks, companies have been using their internal accruals for funding their projects rather than borrowing from banks as the cost of funds has gone up.
“Loans to companies have been declining in the last few weeks as sanctions have dried up with expectation of further steps by the government,” said an executive from a public sector bank.
Also, high interest rate on home and auto loans had made people defer their purchase plans.
In the light of higher cost of funds and tight liquidity situation, banks have also been very careful in lending.
However, the 24.5 per cent growth on a year-on-year basis is higher than the 22.4 per cent reported in the corresponding period last year and also more than the 20 per cent non-food credit growth targeted by RBI this year.
Both food and non-food credit slowed down in the fortnight with food credit at Rs 870 crore while the non-food credit at Rs 1,549 crore against Rs 1,849 crore and Rs 7,560 crore respectively a fortnight ago.
With the falling crude oil prices and declining global demand, financial resources required by the oil companies have come down. This has resulted in lower non-food credit growth over the few fortnights.
Another executive from a private sector bank said that corporates have started revisiting their projects and are consolidating their business plans.
“Companies are using funds parked in mutual funds for their capital requirement rather than relying on banks and the quantum of resources availed by the oil firms have reached sea level, both contributing to lower credit off-take,” said Puneet Chhadda, MD, commercial banking, HSBC Bank.
Deposit growth has slowed down to 20.8 per cent on a year-on-year basis as most banks have cut rates. Banks were giving rates as high as 11-12 per cent for deposits for a period of 3-5 years. Time deposit, or those with tenure of less than a year, fell Rs 2,852 crore while the demand deposit dipped by Rs 3,229 crore during the fortnight ended December 19.
Banks investments in government securities and other approved securities have fallen by 1.8 per cent in the fortnight taking the outstanding investment to Rs 1,085,981 crore. The banks investments in government securities declined by Rs 20,161 crore.
