The latest Reserve Bank of India (RBI) data had shown that the growth of credit off-take has slowed down to 14.6% during the current fiscal so far, against 20.3% till this time last year. And with the central bank expected to continue with a tight monetary policy, as inflation touching a ten-month high of 5.02% and also due to the threat of turbulence in global markets, credit off-take is not expected to be very impressive by the fiscal-end.
However, many bankers feel the credit off-take is only ?seen as slowing down? as it was compared with the phenomenal growth of around 30% seen in the last couple of years. At that time, experts and policy makers were worried about over-heating of the economy. Several banks were considered to be indulging in over-lending as far as home loans, auto and consumer durables loans were concerned.
RBI had then stepped in and through its tight monetary policy ensure that despite the surplus liquidity conditions, bank credit growth was moderated. It hiked interest rates several times since June 2006 to control credit growth and inflation in the economy. In the January 2008 policy review, the central bank kept its key rates steady. It justified the move saying inflation risks persisted.
Arun Kaul, general manager, treasury and finance, at Punjab National Bank (PNB), said: ?The low credit growth has been due to RBI?s tight money policy. However, some banks have reduced their interest rates for credit push. Since the results can be seen only after a time lag, we will have to wait for some more time to see if there is a growth in credit off-take. Also, the growth for the next fiscal depends on what the RBI?s policy indicates?.
However, several bankers are optimistic that the credit off-take growth will pick up in the last quarter. M S Sundara Rajan, chairman and managing director, Indian Bank, said: ?Around Rs 25,000-40,000 crore worth liquidity is there in the banking system. Each bank, depending on their comfort level, will use the money available to provide loans to small and medium enterprises, automobile and other sectors as well as grant personal loans to ensure that all round credit off-take goes up.? Also since the financial year is coming to an end, each bank will be trying to achieve their respective credit target. October-March being a busy season, will help them in meeting the set target,? he added.
ICICI Bank Joint Managing Director Chanda Kochhar said ?with corporate credit and loans to investment projects on the rise in the last quarter, the banking sector should end this fiscal with a 20% growth in credit.?
Non-food credit has dipped to Rs 2,84,521 crore in this financial year so far, from Rs 3,03,281 crore in the same period last year. ?Demand from the corporate sector is strong, especially after the government put restrictions on external commercial borrowings. Those external loans have now been substituted by domestic funds,? said Abheek Barua, chief economist, HDFC Bank Ltd.