India Inc?s clearly back in business. Non-food credit, the amount of money that banks lend to companies and individuals, has grown at a smart 15.2% for the fortnight ended January 29, 2010. That?s a good 80 basis points above the growth of 14.4 % for the previous fortnight ended January 15, 2010. Of course, the 15.2% growth comes off a low base. That apart, it?s also true that companies have been accessing non-banking sources over the past six to seven months for loans. Nevertheless, bankers assert that demand for credit, especially from the corporate sector is increasing and the Reserve Bank of India?s (RBI) targeted credit growth for 2009-10 of 16% may just be hit.
Says Srinivasan V, executive director, Axis Bank, ?It?s clear from the higher quantum of borrowings of Rs 18, 780 crore, in the 15 days to January 29, that most of the demand is from large corporates.? Srinivasan points out that as liquidity tightens financing from non-banking sources will continue to reduce.
Adds Romesh Sobti, CEO & MD, Indusind Bank, ?Demand for credit from corporate is strong and we are almost approaching the peak levels of lending that we hit in 2008 before the slowdown.?
M Narendra, executive director of Bank of India, observes that there is a pick -up in demand for loans from various sectors like infrastructure, steel, cement and automobiles and confidence levels seem to be improving. Narendra said the bank expected a total credit growth of 18% in 2009-10.
According to data released by the RBI, total credit growth (including food credit) for the fortnight ended January 29, 2090, was 14.83 %, above the growth of 13.88% reported for the previous fortnight. The credit outstanding with borrowers was Rs 3,91,299 crore for the fortnight ending 29 January 2010.
In its recent monetary policy, the RBI lowered its credit growth target for the banking sector for the current fiscal year to 16% from the 18% that it had targeted in October 2009. Similarly, the deposit growth rate target was also reduced to 17% from 18%.
While announcing the third quarter review of the monetary policy 2009-10 on 29 January, RBI governor D Subbarao admitted that the earlier projected growth of 18% was not likely to be met. ?Accordingly, the indicative adjusted non-food credit growth projection for 2009-10 is now reduced.? This comes on the back of the cut in credit off-take target to 18% from 20% during the October 2009 review of the policy.
The non-food bank credit growth rate fell steeply from its peak of 29% registered in October 2008 to a tad over 10% in October 2009. The impact of the slowdown in economic activity also had its effect on demand for funds.
