Credit offtake falls by Rs 8k cr, forex reserves rise $2.9 billion

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Forex reserves up $1.52 billion

Mumbai: Despite the economic and monetary stimulus packages, the latest data from the Reserve Bank of India reveals that bank loans fell by Rs 8,822 crore in the two weeks ended January 30, reducing outstanding advances to Rs 26,36,338 crore, according to central bank.

While non-food credit, loans to industry and consumers, dropped by Rs 4,648 crore during the period, food credit dropped Rs 4,175 crore.

Credit rose 19.3%, or by Rs 4,26,021 crore, in the 12 months through January 30. Total bank deposits rose by 18.7%, or Rs 5, 77,091 crore, in the same period to Rs 36,68,801 crore.

Analysts say despite banks slashing their lending rates on various retail loans, credit offtake have failed to pick up as there is a good amount of financial uncertainty floating around, with a fall in the disposable income and people have started fearing job losses. Hence, while retail loan portfolios of various banks have shrunk.

However the country's foreign exchange reserves rose $2.9 billion to $251.5 billion in the week ended February 6, the Reserve Bank of India said in its weekly statistical statement, on Friday.

Foreign-currency assets increased $2.9 billion to $241.8 billion, while the country's gold reserves were unchanged at $8.9 billion, the central bank said. India's special drawing rights with the International Monetary Fund were unchanged at $3 billion, while its reserves with the IMF decreased by $1 billion to $829 billion. India's foreign-exchange reserves declined $39.3 billion, in the past year, the bank said. Also, money supply in India grew 17.9% in the two weeks ended January 30 from a year earlier, compared to 18.7% in the prior two weeks, the central bank said.

Over the past quarter, since September 2008, the banking system has witnessed a drop in the credit off-take as credit disbursals have slowed down due to tight lending conditions and management of rising credit risk.

In September 2008, credit growth had touched 26.1%, which slid to 24.8% in October 2008. In November 2008, credit growth then touched 27.7%. It then rose by 29%, or Rs 5, 88,333 crore, in the 12 months through October 24.

However, in December 2008, it declined to 26.4% in the 12 months through December 5.

There are various factors which have affected the credit growth, which is to do with both the demand as well as the supply side.