First-half credit growth at 24.8% on oil firms' borrowings

The Reserve Bank of India (RBI) on Wednesday said credit extended by scheduled commercial banks, including regional rural banks (RRBs), went up by 24.78 per cent on a year-on-year basis to Rs 25,42,467 crore as of September 26, 2008.

Market experts said credit growth during the first half of the financial year was higher than their expectation, but the rate was expected to dip in coming months.

Bankers attributed the higher-than-projected rise in loan flow to earlier commitments, some of which were made during the last financial year, but was disbursed this year. In addition, demand from oil and fertiliser companies was cited as the reason for the near 25 per cent growth.

 

RBI had estimated that credit flow would rise by around 20 per cent this year, but repeated increase in interest rates has not helped lower the credit growth.

The central bank can draw solace from the fact that the growth rate has fallen to 26 per cent at the end of September 12, the last reporting fortnight. The fortnight ended September 26 also saw heavy liquidity crunch, forcing RBI to initiate measures. Bankers said the cash crunch has forced them to go slow in lending in the last three weeks or so.

Banks borrowed heavily from the central bank, the data released on Wednesday revealed, following RBI permitting banks to raise funds up to the limit of 1 per cent of SLR and banks requiring credit for the advance tax payment. The borrowing by scheduled commercial banks and regional rural banks from RBI went up from Rs 64 crore last year to Rs 6,094 crore this year.

Although banks are offering attractive interest rates, deposits with the SCBs including RRBs, grew 19.7 per cent to Rs 34,42,137 crore against Rs 28,73,734 crore since the last one year.

Time deposits, or those with a tenure of less than a year, rose by 21.3 per cent, while the demand deposits grew by 11.4 per cent during the fortnight ended September 26.

A senior executive of a public sector bank said, “Due to widening differential interest rates between demand and time deposits people are shifting to the latter.” He added that banks are also offering automatic transfer from current account to savings account.

RBI expects deposits to grow by around 17 per cent in 2008-09.