n Hits decade low; misses RBI forecast as corp demand slumps
Non-food credit growth slumped to a decade low in 2012-13, falling short of Reserve Bank of India’s (RBI’s) projection of 16%, as demand for loans from companies remained weak.
As on March 22, non-food loans grew by 14.04% year-on-year to R51,66,414 crore against a growth of 16.8% in 2011-12. The last time credit growth was this low was in 2001-02, when it grew at 13.2%.
RBI considers the outstanding loans and deposits as on the last reporting Friday of a financial year for its growth-projection calculation. Bankers were clearly stumped by this unexpectedly low growth number and warned that it could mean that the investment cycle is yet to recover.
?I am very surprised with the credit growth numbers as we expected a pickup in loan disbursements in the final quarter of the financial year. We were expecting a 15.5% growth in credit,? said Oriental Bank of Commerce CMD SL Bansal.
But the country’s largest lender, State Bank of India (SBI) doesn’t seem perturbed. ?For SBI, we have been able to meet our targets on both credit and deposit. In fact, credit growth has been much better than expected,? said SBI MD Krishna Kumar. He added that for 2013-14, credit and deposit growth for the bank would be between 16% and 18%. In its January policy, the RBI had lowered its projection of credit growth to 16% from 17%.
?Big corporates are not availing their loan sanctions and exporters are also limiting their borrowings owing to weak export demand. This does not augur well for the economy as it means that investments will be hampered,? said Bansal.
The troubles in the infrastructure sector had dragged down credit growth, according to Union Bank of India executive director SK Jain. ?The loan pickup in certain sectors has remained weak, particularly in the infrastructure segment where bottlenecks like land acquisition and regulatory clearances have hampered growth. However, lending towards retail and agriculture growth still remains strong,? added Jain.
Meanwhile, deposit growth for the financial year was 14.26% y-o-y at R59,09,082, better than 13.5% in the last fiscal. But the deposit growth too missed RBI’s projection of 15% by a whisker.
?Deposits on the other hand have done better considering we were expecting a 2 percentage point lag between credit and deposit growth. The more worrying factor I think is the credit growth? Bansal said.
But bankers are worried that cheaper sources like current account savings account (Casa) are showing negative growth. Latest data showed that in 2012-13, demand deposit grew by 5.8%, while time deposits grew by a decent 15.2%. Time deposits are those that are locked in with the bank for a certain fixed tenure and banks pay a higher interest on them than on demand deposits, which can be withdrawn anytime.