Non-food credit grew at 15.4% year-on-year in the fortnight to February 10, the slowest pace of growth in the current fiscal, taking outstanding credit to R43,00,811 crore. In the previous fortnight, loans to corporates and individuals had grown at 16.1% y-o-y according to Reserve Bank of India data released on Thursday.
With the economy slowing, demand for loans too has been coming off. The pace of growth of deposits too slowed down, increasing at just 14.95% y-o-y in the fortnight to February 10, taking the outstanding deposit in the system to R58,00,458 crore.
Loan growth at most public sector banks was in the range of 15-18% in the three months to December, 2011. Union Bank of India CMD MV Nair has said that the bank is looking to trim loan rates to woo customers. ?We will cut our lending rate across all our retail products very soon,? Nair said earlier this week.
State Bank of India is learnt to have cut rates for education loans the weekend and has hinted at more such measures to push up sagging demand. Other public sector lenders like Bank of Maharashtra and Central Bank of India also trimmed home loan rates last week to attract customers.
?While loan growth for state-owned banks picked up sequentially, on a ytd (year-to-date) basis it remains low, led by impact of slowing corporate loan growth and higher asset quality related issues over past two-three quarters,? Motilal Oswal observed in a report.
Surprisingly, bank stocks have rallied smartly so far this year, gaining anywhere between 20% and 40% despite concerns on asset quality. In the three months to December 2011, restructured loans increased sharply, particularly due to one large telecom account. On average, state-owned banks restructured around 100 basis points of overall loans, of which roughly 50% was on account of telecom segment. In its third quarter review, the RBI had revised the projection for the growth in non-food credit growth to 16% for the current year from the 18% that it had announced earlier.
The RBI pegged deposit growth at 17% in its last policy review and added that there are signs of increasing risk aversion by banks, which could adversely affect credit flow to productive sectors of the economy.
