With more companies looking to fund their working capital from banks, non-food credit grew at an impressive 17.31% year-on-year (y-o-y) to R54,27,173 crore from R46,26,466 for the fortnight ending on August 23, latest figures from the Reserve Bank of India (RBI) showed. This is the second consecutive fortnight when credit growth has been above 16%. In the fortnight ended Aug 9, credit grew at 16.7% y-o-y.
Bankers said the sudden change from 14% growth levels was not due to long-term credit demand from corporates or sudden jump in retail loan demand, but was rather due to the liquidity tightening measures taken by RBI which made more sense for corporates to borrow from banks rather than from the commercial papers (CP) and certificates of deposit (CD) market.
RBI had announced a number of measures to stem the slide of the rupee since July 15, which has led to drying up of liquidity from the market.
?Companies are availing more bank loans for their working capital needs as the CP and CD market has turned expensive,? said a senior banker form Central Bank of India.
Meanwhile deposit growth continued to be weak and hovered around 13%. Deposits grew to R71,13,025 crore from R62,95,161 crore y-o-y. While time deposits grew 13.54% and demand deposits grew 7.90%. Time deposits increased to R64,58,907 crore from R56,88,906 crore y-o-y and demand deposits grew to R6,54,123 crore from R6,06,255 crore from the same period last year.
Time deposits are those which are locked in with the bank for a fixed tenure and banks pay a higher interest rate on them than demand deposits, which can be withdrawn anytime.
