Non-food credit growth continues to remain in single digits at 9.84% as on September 4 compared to the same period last year, according to the latest Reserve Bank of India (RBI) data.
Outstanding loans in the banking system stood at Rs 65.99 lakh crore as on September 4 compared to Rs 65.33 lakh crore in the previous fortnight — a rise of Rs 35,991 crore. Although the credit offtake is seeing some improvement over the last two fortnights, it has shrunk since the beginning of this fiscal. Since early April, the non-food credit growth has shrunk by 2.39% with the outstanding amount seeing a reduction by Rs 1.62 lakh crore.
A large part of this shrinkage in the banking system can be attributed to the lack of corporate credit offtake. Banks have been depending on their retail and SME segments for driving their loan books.
And whatever little credit growth can be seen in the corporate segment has mostly shifted to the corporate bond market. Between April and September, firms have mopped up close to Rs 2.16 lakh crore through the corporate bond market, indicating a major shift from bank borrowing.
The deposit growth has also taken a hit with the growth figure standing at 11.59% on a year-on-year basis while it stood at 11.91% in the previous fortnight. However, this indicates a significant different between the non-food credit growth and the deposit growth in the banking system.
Banks have been cutting deposit rates over the past six to eight months with most lenders paying close to 7.50-7.75% for one year term deposits. This is lesser than the yields offered by various schemes for corresponding periods by the department of Post. RBI has reduced the repo rate by 75 bps in CY15. Banks have also been bringing down their base rates over the past few months but this has not helped them bring their lending rates anywhere near the corporate bond yields.
The lowest base rate in the banking system as of now stands at 9.35% by HDFC Bank. Even then the difference between the yields on long-tenure bonds and the base rate stands at 80-100 bps.