With growing exposure in infrastructure and retail segments, the banking industry has recorded a 22.28% growth in its non-food credit to Rs 33,47,939 crore for the fortnight ended July 2, 2010.

In percentage term,the growth in non-food credit is a whopping 193 basis points over 20.35% registered in the previous fortnight ending June 18.

According to the latest credit figures released by RBI, the total credit by the banking industry rose 21.71% y-o-y for the fortnight ending July 2, 2010 as against 19.60% in the previous fortnight ending June 18, 2010. The total incremental amount lent for both non-food and food segments by scheduled commercial banks during the fortnight is pegged at around Rs 92,000 crore as against Rs 22,343 crore recorded in the previous consecutive fortnight. The RBI in its first quarter review of credit and monetary policy has projected a total credit growth of 20% in 2010-11.

Bankers sounded optimistic over credit growth in the current year. Most bankers feel a relatively good monsoon would give further push in agricultural lending and retail lending, going forward. According to them credit growth should easily achieve 25% in the current year, surpassing RBI?s projected 20%.

?The banking industry should see credit growth this year in the range of 22-25%. At the end of first quarter, monsoon is going to play significant role in credit-off take wherein we would see a rise in agricultural loans and retail loans,?said M Venugopalan, managing director & CEO, Federal Bank. In corporate lending, banks have so far seen a rise in infrastructure especially in power sector. ?We have witnessed credit movement going up in power sector and fertiliser sector. In retail segment, two-four wheeler loans have also picked up. Overall, we have so far attained 25% credit growth,? Harish Engineer, executive director, HDFC Bank, said.

Meanwhile, the growth in deposits, among banks, picked up at 14.93% y-o-y for the fortnight ended July 2, 2010, as against 13.92% y-o-y in the previous fortnight.

Banks saw inflows of Rs 115162 crore during the period under review as against a de-growth of Rs 23761.17 registered in the previous fortnight (from June 4-18, 2010). RBI data shows that deposits rose by 14.93% to Rs 46,32,703 crore during the fortnight ended July 2. The RBI has projected deposit growth at 18% for 2010-11.

Bankers expect a rise of 25-50 points hike in policy rates in the next policy scheduled on 27 July. ?I expect 25 basis point hike in both repo and reverse repo in the next policy. After that, we could see all banks raising their deposit rates,? said Romesh Sobti, managing director and CEO, IndusInd Bank who sees no reason to worry for the slow deposit growth.

Banks? CD ratio improves, SLR portfolio declines

With a rise in credit off-take since the last quarter of FY09-10, the Credit to Deposit (CD) ratio of the banking system improved to over 73% as on June 18, 2010 from 72% as on March 26, 2010 and from under 70% in early December 2009. The excess statutory liquidity ratio (SLR) , estimated at nearly Rs 3 lakh crore as on end March 2010 declined to around Rs 2.3 lakh crore as on June 18, 2010, as banks pared their investments to meet credit growth and also to manage their liquidity needs According to a Financial Markets & Banking Update prepared Icra, the corporate bond issuance remained strong in the quarter ended March 2010 with a number of issues from banks and other financial services entities.

While the issuances by banks were to further improve on the regulatory capital adequacy levels in anticipation of credit growth in the current year, the NBFCs have been raising funds as they got attractive rates as compared to bank borrowings. ICRA estimates that the bond issuance during the quarter ended June was around Rs 35,300 crore (Rs 30,500 crore in the similar period last year and Rs 49,500 crore in the quarter ended March 2010). Debt issuances by banks and NBFC accounted for over 83% of the total issuance during the last three months. Capital issues by banks in the last there months were limited as compared to the corresponding period last year on account of strong regulatory capital adequacy numbers for most banks; in addition the public sector banks are expecting to receive further capital infusion from the Government of India.