Credit growth keeps pace with economy

Over 15% rise in the fortnight ended February 12.

Keeping with the improvement in economic growth, the outstanding bank credit in the 15 days up to February 12 rose by Rs 22,596 crore to Rs 30,51,676 crore, according to data from the Reserve of Bank of India (RBI).

The year-on-year growth in credit as of February 12 was 15.07 per cent over the figure at the end of the same fortnight in the previous year.

Union Bank of India Executive Director SC Kalia said with improvement in international trading, there was growth in export finance. This was in addition to the credit offtake for infrastructure projects.
 

MARCH ON

 

Fortnight-
ended

Credit
 flow
 (Rs cr)Y-o-Y
 growth
 (%)*Deposit
 mobilised
 (Rs cr.)Y-o-Y
 growth
 (%)* 10-Apr1,42918.8070,72622.10 24-Apr-25,26618.1021,95622.50 8-May5,88217.2029,26022.60 22-May16,30615.8615,73022.56 5-Jun21,46015.703,65622.00 19-Jun13,00615.80-5,50222.00 3-Jul28,53216.3062,55921.90 17-Jul-21,18515.34-18,65621.78 31-Jul29,47115.7959,33821.79 14-Aug-5,06214.909,33821.80 28-Aug5,61214.0921,61620.51 11-Sep18,37413.248,12320.19 25-Sep47,19712.6230,21519.79 9-Oct17,16010.7541,34719.98 23-Oct-21,7509.658,40819.02 6-Nov23,1479.7814,36018.55 23-Nov7,056.6310.0818,617.3019.03 4-Dec20,93010.5017,71318.32 18-Dec21,59311.25-21,87317.84 1-Jan79,51513.6682,768.5117.58 15-Jan-11,89813.88-21,96616.84 29-Jan20,17014.8352,81717.09 12-Feb22,59615.074,45116.59 * At the end of fortnight                                                                     Source: RBI

The year-on-year non-food credit growth recovered to over 15 per cent by mid-February 2010 from around 10 per cent in October 2009. Companies had better access to non-bank sources of funds which, to a large extent, mitigated the impact of the slowdown in bank credit growth.

RBI has scaled down the indicative adjusted non-food credit growth for 2009-10 to 16 per cent in the third quarter review from the earlier projection of 18 per cent for 2009-10.

Rating agency Icra in its outlook on the banking sector said, “While credit growth has been muted in the current financial year, we are witnessing some traction since December 2009 and, given the sizeable undisbursed sanctions, credit offtake is expected to pick up from the current quarter.”

Continued recovery in industrial production and services has made RBI to revise its economic growth estimate for 2009-10 to 7.5 per cent from its earlier projection (October 2009) of 6 per cent (with upward bias).

While credit demand moved up in high gear, the pace of deposit mobilisation moderated in the reporting quarter. Outstanding deposits of the banking sector grew by just Rs 4,451 crore as against Rs 52,817 crore in the fortnight ended January 29. Outstanding deposits stood at Rs 42,99,842.94 crore.

The banking system had ample liquidity, so there was no pressure to raise resources even through short-term instruments, Kalia added.

Investments in government and other approved securities declined by Rs 7,365 crore in the reporting fortnight to Rs 13,94,192 crore.

A treasury head of a public sector bank said the first preference was to move funds to better yielding assets (loans). If the tempo of credit demand gathered further momentum, banks would prefer to liquidate investments and deploy it in giving loans, he added.