Non-food credit growth continues to remain in single digits despite it being the busy season. Latest data from the Reserve Bank of India (RBI) show that non-food credit has grown 9.23% in the fortnight-ended October 30 with the outstanding loans at R67.01 lakh crore. That is lower than in the previous fortnight when it stood at 9.79%.
Bankers are expecting the credit growth to pick up in the second half of this fiscal year.
With corporate loan growth continuing to remain subdued, lenders are now concentrating on their retail portfolios to boost their portfolios.
The retail segment becomes all the more significant considering the fact that a large proportion of the corporate borrowing has shifted to the bond markets where yields are at attractive levels.
Although banks have been cutting their base rates after the September 29 credit policy when the RBI slashed the repo rate by 50 basis points, they are yet to match the transmission of the fall in rates that is seen in the bond market.
An AAA-rated public sector unit can issue 10-year bonds at a yield close to 8.25%. However, the lowest base rate in the banking system currently stands at 9.30% — showing a difference of at least 105 basis points. Between April and October, firms have borrowed R2.86 lakh crore through the corporate bond market.
Meanwhile, the deposit growth in the banking system has also been subdued. As on October 30, deposit growth stood at 11.14% compared to the same period last year with the outstanding deposits in the system standing at R91.40 lakh crore.
In the absence of good lending opportunities, issuances of certificate of deposit issuances by banks have been fewer.