Credit growth is one of the key indicators of a country?s economic prospects. With India Inc becoming optimistic about economic recovery, credit growth in most of the banks seems to have achieved RBI?s targeted 16% for the fiscal year 2009-10, although the central bank is yet to release the official figures. For more than a month now, bankers have been talking about a pick-up in demand for loans from individuals and corporates. Anecdotal evidence suggests that Indian banks have achieved credit growth to the tune of 18-20% in FY2009-10.
Interestingly, total credit grew 16.05% year-on-year for the fortnight ended March 12, 2010, for scheduled commercial banks. That?s nearly 26 basis points higher than 15.79% seen in the previous fortnight ended February 26, 2010. According to data released by RBI, total non-food credit rose by 16.28% year-on-year. We have seen a gradual increase in total non-food credit in the last couple of months. In the period between January 29 and March 12, it rose to 16.28% from 15.20%. RBI initially targeted 18% credit growth for banks but later brought it down to 16%, after having learnt about the slower pace of economic growth worldwide.
Businessmen, who are in talks with bankers for loan sanctions, are increasingly embarking upon greenfield and brownfield projects with special focus on the infrastructure sector. The lure of India?s growth story, also endorsed by foreign players, adds fillip to this high degree of optimism, wherein banks? credit disbursement will extend key support to such optimism. Moreover, power sector, non-banking financing companies and retail, too, claim significant shares of banks? lending. The sentiment has improved dramatically in those sectors. NBFCs, which aim to lend more to the SME sector, borrow money from banks. With greater job security in a relatively better economy, retail customers intend to borrow more from banks to fund their house purchases or lifestyle requirements.
It is expected that RBI will fix a higher credit growth target of around 18-20% in 2010-11 while a majority of banks are likely to post credit growth between 19% and 25%.
saikat.das@expressindia.com