Non-food credit or the amount of money that banks lend to corporates and individuals, saw a 20.56% year-on-year growth, to Rs 33,17,583 crore in the fortnight ended August 13, 2010.
Data put out by the Reserve Bank of India (RBI) shows that this is 100 basis points higher than the growth registered in the previous fortnight ending July 30, 2010. The increase in total credit, for the fortnight ended August 13, 2010 was 20.14% y-o-y, with banks lending Rs 11,744 crore.
Bankers are confident that the demand for credit is picking up and are looking to grow their retail loan portfolios. The country?s largest lender, the State Bank of India(SBI) sees most of the growth in its loan book coming from the retail space including home loans and auto loans. Says OP Bhatt, chairman, SBI, ?The bank?s retail loan book is growing at 20-21% year-on-year and should pick up further in the upcoming festival season since we are not planning to increase our lending rate in the short term.?
Moreover, the buoyancy in the economy, bankers said, has prompted many companies to pursue their expansion plans, which in turn is pushing up the demand for loans. Says S Sridhar, CMD, Central Bank of India, ?We haven?t seen credit growth peak just yet though there has been a pick-up in the demand for money between July and September. Companies have started adding to their capacities and we are seeing demand from the infrastructure sector especially in areas such as EPC contracts, auto and textiles.? Central Bank of India is currently clocking a growth in credit of around 21% y-o-y and should hit a growth rate of 25% for the full year.
The RBI, in its first quarter review, had projected a growth in non-food loans of 20% in 2010-11. Bankers, however, believe loan growth could be as high as 25% this year, given that the relatively good monsoon could fuel more demand for agricultural lending and retail loans.
?A good monsoon will result in good prices for agricultural products and ultimately banks would see a spurt in agricultural loans,? Sridhar added. Meanwhile, in a disconcerting trend, the growth in deposits with banks,during the fortnight ended August 13, 2010, was just 14.13% at Rs 46,31,579 crore.
In the previous fortnight ended July 30, 2010, too, the increase in deposits had been just under 14% at 46,39,595 crore. Says B A Prabhakar, executive director, Bank of India (BoI), ?Banks have been raising funds through certificate of deposits, typically at 7.85%, for a maturity of one year. This along with the hike in deposit rates of across maturities has started reflecting in industry?s deposit growth.? BoI, however, is reporting a growth which is better than the industry average, at 19% and according to Prabhakar, should see a deposit growth of 22% in 2010-11.