Bank credit grew by 12.62 per cent — the slowest in six years — in the first half of this financial year compared to the corresponding period a year ago. Credit grew Rs 97,605 crore in April-September 2009, compared to Rs 180,000 crore in the same period last year.
But bankers expect the growth rate to pick up substantially in the second half.
According to the latest Reserve Bank of India (RBI) data, bank credit stood at Rs 28,73,155 crore at the end of September 28, 2009 as against Rs 25,51,025 crore in the same period last year.
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ON SLIPPERY WICKET
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Fortnight-
ended | Credit flow | Y-o-Y growth | Deposit mobilised | Y-o-Y growth |
| 10-Apr | 1,429 | 18.80 | 70,726 | 22.10 |
| 24-Apr | -25,266 | 18.10 | 21,956 | 22.50 |
| 8-May | 5,882 | 17.20 | 29,260 | 22.60 |
| 22-May | 16,306 | 15.86 | 15,730 | 22.56 |
| 5-Jun | 21,460 | 15.70 | 3,656 | 22.00 |
| 19-Jun | 13,006 | 15.80 | -5,502 | 22.00 |
| 3-Jul | 28,532 | 16.30 | 62,559 | 21.90 |
| 17-Jul | -21,185 | 15.34 | -18,656 | 21.78 |
| 31-Jul | 29,471 | 15.79 | 59,338 | 21.79 |
| 14-Aug | -5,062 | 14.90 | 9,338 | 21.80 |
| 28-Aug | 5,612 | 14.09 | 21,616 | 20.51 |
| 11-Sep | 18,374 | 13.24 | 8,123 | 20.19 |
| 25-Sep | 47197 | 12.62 | 30,215 | 19.79 |
| Note: Figures in Rs crore ; y-o-y growth (%) at the end of fortnight Source: RBI | ||||
Bank executives attribute the decline in first-half growth to lower demand for credit by the corporate and interest rates uncertainly. During the fortnight ended September 28, 2009 bank credit grew by Rs 47,197 crore as compared to Rs 51,219 crore during the same fortnight last year.
“In order to avoid the charge on commitment fee, some companies have come forward to avail the loans sanctioned to them. The credit in this fortnight is mainly loan disbursed in the earlier quarters but availed now,” said Bank of India CFO VKR Agrawal.
“Banks are no longer wary about lending. The real demand will come in the system from housing and real estate,” said Nomura economist Sonal Varma. Typically, credit offtake gains momentum during the last fortnight of September as banks push up credit to meet their target and companies avail working capital requirement.
“Certain factors like interest rate, stimulus package, and real estate prices have kept credit growth under check. We expect the growth to pick-up going ahead,” said Standard Chartered Economist Anubhuti Sahay.
High inflation, good demand by the corporate and high borrowing by the oil companies had led to huge lending during the first half of the last financial year. Whereas this year, the inflation is low, demand for credit by corporate is not high and oil process are at around $70 per barrel against $140 per barrel last year.
During the first half, deposit mobilisation went up by Rs 2,85,897 crore as compared to Rs 2,45,198 crore in the same period last year. On a year-on-year basis, bank credit went up by 19.79 per cent. During the fortnight it grew by Rs 30,215 crore. Time deposit or deposit with tenure less than a year grew by Rs 2,66,658 crore and demand deposit with tenure more than a year grew by Rs 28,486 crore. Bankers said that despite the restrictive measures by banks, deposit is flowing in as it is a safer investment avenue. Banks have cut deposit rates from 8.75-10 per cent during September 2008 to 6.50-7.75 per cent in September 2009.
Due to high government borrowings, banks’ investment in instruments that qualify for statutory liquidity ratio (SLR) like government securities went up by Rs 2,06,612 crore during April-August 2009-10 as against Rs 15,526 crore in the corresponding period last year. Banks are maintaining SLR above the regulatory requirement of 24 per cent. Most banks’ SLR is at 27-28 per cent.
