The growth rate of non-food credit of banks marginally declined to 9.72% (Y-o-Y) during the fortnight ended August 19, compared with 9.92% in the previous fortnight, Reserve Bank of India (RBI) data released on Wednesday showed.
The outstanding non-food credit in the banking system stood at R71.72 lakh crore as on August 19, compared with R65.63 lakh crore in the same fortnight last year — a rise of R6.09 lakh crore.
On the other hand, the rate of growth in deposits improved slightly to 9.19% (Y-o-Y) compared to 8.71% in the previous fortnight.
With hardly any growth in project loan sanctions, the credit growth of 9.72% was most likely a function of demand from the retail segment, something which the managements of several large banks have lately spoken about as their focus areas.
Another relatively bright spot for loan growth in recent months was the demand for working capital loans.
Companies have been moving their borrowings to the corporate bond market due to lower interest rates. In the first quarter of the current fiscal, firms mopped up over R1.3 lakh crore through the corporate bond market, as against R4.6 lakh crore raised in FY16, indicating a shift from bank borrowing.
In order to achieve the monetary transmission by ensuring that lending rates remain sensitive to policy rates, the 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 April 1.
This, because despite a 125-bps cut in the repo rate in CY15, banks had brought their base rates down by a maximum of 70 bps.