The growth rate of non-food credit of banks rose for a second successive fortnight and was back in the double digits at 10.02% (y-o-y) in the fortnight ended July 8, as compared to the 9.76% seen in the previous fortnight, Reserve Bank of India (RBI) data released on Thursday shows. Outstanding non-food credit in the banking system stood at Rs 71.88 lakh crore as on July 8, as compared to Rs 65.34 lakh crore in the same fortnight last year — a rise of Rs 6.54 lakh crore. On the other hand, the rate of growth in deposits fell to 9.52% (y-o-y) compared to 9.71% in the previous fortnight.
With hardly any growth in project loan sanctions, the 10.02% credit growth is most likely a function of demand from the retail segment, something which the management of several large banks have lately spoken about as their focus area. Another relatively bright spot for loan growth in recent months has been the demand for working capital loans. Meanwhile, companies have been moving their borrowings to the corporate bond market due to lower interest rates. They mopped up over Rs 1.3 lakh crore in Q1 via this route. To achieve monetary transmission by ensuring that lending rates are sensitive to policy rates, RBI has made it mandatory for banks to adopt the marginal cost of funds based lending rate (MCLR) as the benchmark for lending instead of the base rate from the 1st of April.