Credit growth, or the money that banks lend to companies and individuals, has hit the 16% mark, the target set by the Reserve Bank of India (RBI) for 2009-10. Total credit and net non-food credit grew by just over 16% in the fortnight to March 12, 2010.
For more than a month now, bankers have been talking about a pick up in demand for loans from individuals and corporates. Total credit grew 16.05% year-on-year for the fortnight ended March 12, 2010. 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.
Total credit outstanding with borrowers stood at Rs 31,24,850 crore for the fortnight ending March 12, 2010. In its last monetary policy, RBI had lowered its credit growth target for the banking sector in the current fiscal to 16% from 18% that it had targeted earlier.
Bankers expect further improvement in the credit offtake, with the economic recovery gaining momentum. But they don?t expect hike in key rates to tame the soaring inflation and to impact lending rates immediately. Therefore, the demand for credit from both the corporate and retail segments is expected to continue to grow.
Bankers confirm there are more takers for money. ?Yes, we are seeing a pick up in credit offtake. For instance, in the infrastructure segment, our book should grow by over 20% this year while our SME portfolio should grow by about 25-30 %.? Union Bank hopes to end 2009-10 with a credit growth of around 20%,? said Union Bank of India executive director S Raman.
However, State Bank of India (SBI) is planning to grow its loan portfolio by 20% in 2010-11, according to OP Bhatt, the chairman of the bank. Bhatt recently observed that while customers were borrowing, the demand was still somewhat subdued. Indeed, R Gopalan, secretary, financial services, had told FE last week that public sector banks are targeting a credit growth of 20% in the next fiscal.
Meanwhile, deposits (time and demand) have grown by 18.14% year-on-year to Rs 44,02,943 crore for the fortnight ended March 12, 2010. RBI in its January credit policy had reduced the deposit growth rate target to 17% from 18%. The central bank on March 19 hiked the repo and reverse repo rates by 25 basis points with the objective of keeping inflation in check. RBI governor D Subbarao said the apex bank would continue its exit from the monetary stimulus to check high inflation and ensure sustainable economic growth. Economists and banking analysts believe systemic rates could rise by anywhere between 100 and 150 basis points in 2010-11.