The growth in non-food credit, or the amount that banks lend to companies and individuals, was up 17.28% year on year for the fortnight ending April 9, 2010. That?s better than the growth of just under 17% year-on-year seen in the previous fortnight. However, the amount lent in these 15 days was a paltry Rs 826.21 crore, as is not uncommon at the start of the fiscal. Nevertheless, a glance at the credit data over the last 4-5 fortnights indicates that companies are borrowing more for their working capital needs while individual customers too seem to have regained the confidence to leverage themselves. Also, with the economy clearly recovering, bankers are becoming less risk-averse.
The Reserve Bank of India (RBI) has set a rather modest target for the increase in non-food credit, of 20% for 2010-11, given that the growth last year was around 16.5%.
However, the central bank would have taken into consideration bankers? views at the meeting held just before the announcement of the monetary policy statement for this year. Bankers had indicated at the time that credit growth this year would be in the region of 20-22%.
The RBI has projected that the economy will grow at 8% with an upside bias this year, over a 7.2% growth in 2009-10. After 2007?s credit bubble, growth was subdued in 2009 but has been picking up in the the last few months. Indeed, there was record growth in loan disbursals in the last reporting fortnight for 2009-10, when banks lent an additional 1,15,548 crore in the 15 days to March 26, 2010, almost 25% of the Rs 4,64,849 crore disbursed in the entire financial year.
Total credit disbursed by banks grew 17.04% year-on-year for the fortnight ended April 10, 2010. Somnath Sengupta, executive director and CFO, Axis Bank believes that a 20% growth in loans is not an ambitious target, given the robust GDP projections. Says Sengupta: ?Even if interest rates go up, there should be enough demand for money.? KR Kamath, CMD, Punjab National Bank, believes that the 20% target should be achieved even if interest rates rise. ?There is a very clear indication of an upward bias to interest rates, though rates may not move up immediately,? he says. Kamath believes that lending to the infrastructure space will increase this year.