With other sources of funds like stock exchanges, commercial papers and non-banking finance corporation (NBFCs) drying up, lending by commercial banks increased 24% or Rs 5,14,980 crore during the year ended January 2, 2009 as compared to the previous year. Of this, public sector banks accounted for majority share of additional lending at Rs 4,28,302 crore, a year-on-year growth of 28.6% as compared to 21.4% in the preceding corresponding period.
But foreign and private banks emerged as the weak links with their credit growth coming down by half. While growth in incremental loans by foreign banks fell to just around 17% at Rs 25,016 crore from over 30% a year ago, that of private lenders came down to Rs 52,375 crore, expanding around 12% against more than 24% a year ago, Reserve Bank of India data shows.
Firms raised only Rs 13,559 crore through public issues during the fiscal so far as compared to Rs 34,413 crore during the corresponding period last fiscal. Commercial papers subscription also came down to Rs 20,004 crore as against Rs 31,351 crore a year ago. Growth in loans by non-deposit taking NBFCs was negative as compared to Rs 20,304 crore last year.
?Increase in bank credit during 2008-09, so far, has been significantly higher, partly reflecting increased credit demand of corporates emanating from deceleration in credit flow from other sources. Overall, total flow of resources to the commercial sector during 2008-09, so far, has been somewhat lower than that in the comparable period of 2007-08,? RBI said in its third quarter review of macroeconomic and monetary developments.
So far this fiscal, the central bank has slashed the cash reserve ratio by 400 basis points (bps) to 5%, short term lending rate or repo rate by 350 bps to 5.5% and reverse repo rate by 200 bps to 4% to improve the liquidity position of banks, encouraging them to lend more.
The incremental non-food credit by banks grew 24.8% year-on-year (y-o-y) as on December 19, 2008 at Rs 4,90,199 crore, as against a growth of 21.8% on December 21, 2007. The industry, led by infrastructure, petroleum and construction sectors, consumed 48% of the non-food credit during the period. Infrastructure alone accounted for 28% of the incremental loans of Rs 65,987 crore as compared with 29.7% in the corresponding period of the previous year.
The small and medium enterprises (SMEs) and non-banking finance corporations (NBFCs) were left starving for funds. Bank credit to SMEs grew just 7.4% year-on-year as compared to 35% last year. At the same time, loans to NBFCs were up 40% as against around 60% a year ago.
Loans to petroleum and fertiliser industries grew by a whopping 101.8% by December 2008 as compared with a growth of 11.8% a year ago as their fund requirement rose after the international price of crude oil skyrocketed to $147 a barrel in August. The crude oil price has since come below $50 a barrel, which would enable banks to lend more to other sectors.
The agricultural sector accounted for 10.9%, or Rs 53,612 crore, of incremental non-food credit growth as compared with 10.7% during the corresponding period of the previous year. Personal loans made for nearly 14.7% of non-food credit, with the share of incremental housing loans being 8.8% as compared to 14% a year ago. The outstanding credit card receivables were Rs 29,359 crore, up by a sharp 69.6% against 45% in the year before. Growth in loans to commercial real estate remained high at 48.1% against 36%. However, the share of consumer durables in the additional loans fell to a meager 0.6% from 5.9% a year ago.