Non-food credit or the amount of money that banks lend to corporates and individuals, grew at a slower pace of 19.06% year-on-year to Rs 33,72,059 crore during the the fortnight ended September 24, 2010.
This is nearly 100 basis points lower than the growth in previous fortnight ending September 10.
Meanwhile, deposits too grew at 14.29% to Rs 4707293 crore, around 50 bps lower than the earlier growth rate recorded for the fortnight ended September 10, 2010.
Data put out by the Reserve Bank of India on Wednesday, shows that banks incrementally lent Rs 39,364 crore during the fortnight. Total outstanding credit, which has grown by 19.05% y-o-y stands at Rs 34,22,291 crore.
The Reserve Bank of India in its annual credit & monetary policy has projected a credit growth of 20% for the current fiscal. Bankers see raising of lending rates across the industry as the reason behind such sluggish credit growth. The bankers still exude confidence to reach growth targets. The expected boom in infrastructure sector, manufacturing sector and retail sector are fuelling optimism among the bankers.
Ramnath Pradeep, CMD, Corporation Bank, said, ?As most banks raised their base rates above 8%, some corporates have shifted their focus to raise funds from the commercial paper market at 7.50%.
Now, commercial papers rates, too have moved up and after September 24, banks are seeing credit offtake.?
Corporation Bank, which recorded 31% credit growth as on September 30 has been lending to Non-banking finance institutions, the manufacturing sector and retail sector.
Canara Bank , executive director, HSU Kamath, said, ?Credit growth is happening mostly in the infrastructure sector. Moreover, growth can also be seen in sectors like iron and steel as well as real estate. Our loan book is growing at 21% and we expect to grow our book by 22% for the 2010-11.?
The bank is also witnessing good growth in SME and retail sectors.?
However, following the latest round of hikes of key rates, State Bank of India (SBI) in its mid-term review has revised its credit growth target downward by almost 3% for 2010-11.
Confirming the development to FE, SS Ranjan, CFO, SBI said, ?We have moderated our credit growth target to 18% from 21% projected for the current fiscal.??
Recently, Reserve bank of India hiked its policy rates by 25-50 basis points in its last monetary policy held on September 16.
Reserve Bank of India increased repo rate by 25 bps, the rate at which it lends to the banks while the reverse repo rate at which banks park their excess funds, was hiked by 50 basis points.