For the second consecutive fortnight after a gap of seven months, non-food credit of banks grew in double digits, at 11.20% year-on-year (y-o-y) for the fortnight ended December 25, according to Reserve Bank of India (RBI) data.
Outstanding loans in the banking system stood at Rs 70.17 lakh crore as on December 25, compared with Rs 63.18 lakh crore in the previous fortnight — a rise of Rs 6.98 lakh crore. The rise in non-food credit growth is in line with bankers’ expectations of a pick-up in credit offtake in the second half of the current fiscal.
Growth in deposits, however, slowed down compared with the previous fortnight, at 10.88% y-o-y as against a rise of 11.46% y-o-y in the November 27 fortnight.
Barring the fortnight under review and the one before, non-food credit growth in the current fiscal has been subdued, not having crossed single digits between the fortnights ending May 15 and November 27. As on November 27, the outstanding amount had fallen by as much as R1.58 lakh crore since the beginning of the financial year and non-food credit growth stood at 9.94%.
The subdued growth in credit offtake could partly be attributed to companies shifting their borrowings to the corporate bond market due to lower interest rates. Between April and December, firms mopped up close to Rs 3.41 lakh crore through the corporate bond market, indicating a shift from bank borrowing.
Meanwhile, banks have been cutting deposit rates since October last year with most lenders paying close to 7.50% for one year term deposits. This is lower than the yields offered by various schemes for corresponding periods in small savings schemes of the government. RBI has reduced the repo rate by 125 bps in CY15 and banks have brought down their base rates by a maximum of 70 bps.
The lowest base rate in the banking system as of now stands at 9.3% for State Bank of India (SBI) and HDFC Bank.