For April-December 2012, incremental credit at R3,89,110 crore was lower than R4,04,530 crore in the corresponding period of 2011. Credit growth for April-December slackened to 9% compared with 10.8% last year. In October, RBI, recognising the weak demand for credit, lowered its FY13 growth projection for non-food credit to 16% from 17%.
Bankers said the slowdown has resulted in lower demand for loans as investments in new projects steadily declined. They do not see long-term credit from corporates significantly improving even in the fourth quarter of FY13, but said it could be better than rest of the year.
Credit to industries has been slower than last year for all the months between April-November with an average growth of 17.5% compared with average growth of 23.3% for the corresponding period last year.Meanwhile, most banks are trying to bolster retail portfolio by offering competitive rates on auto and housing loans.
Most public and private banks followed the State Bank of Indias move to cut interest rates on car and home loans by 50-100 basis points in August, hoping to create demand, but the move has not materialised in an immediate jump in retail credit growth.
According to latest sectoral credit data by the Reserve Bank of India, barring one month, retail loan growth also slowed every month from April-November and averaged 14% in the period compared with growth of 15.9% in the same period last year.
Only in November 2012, retail loan grew 300bps faster than last year at 16.3% as interest rate cuts on car loans lead to higher demand during the festival season.
Bankers said retail loan growth could sustain the momentum as RBI may cut repo rates, which will help them give further discounts to its retail and corporate customers.