The growth in non-food credit or the amount of money that banks lend to corporates and individuals, slipped little below 20% for the fortnight ended August 27, 2010. The target set by Reserve Bank of India for credit growth in 2010-11 is 20%. Banks lent an amount of Rs 33,51,396 crore during the fortnight, an increase of 19.81% year-on-year. While bankers have been concerned about what they believe is a sluggish offtake in credit, they believe things could look up in the next few months.
Chanda Kochhar, managing director & chief executive officer, ICICI Bank, had recently observed, ?I expect credit growth would be much higher in the second half of the year than the first half because several projects are being finalised. Demand for credit will come more from such infrastructure projects.?
Clearly there are opportunities in the infrastructure space. Union Bank, for instance, plans to increase exposure to the infrastructure sector from 13% of its current loan book to 20%. The bank is also seeing demand from non-banking financial companies (NBFCs). ?The non-banking financial companies who do not have access to CP or CD market are currently borrowing short-term money from us at around 8.20% (90 days),? a spokesperson said.
M Narendra, executive director, Bank of India (BoI), observes demand from retail customers is picking up. ?Currently, we are offering auto and housing loans at attractive rates and are seeing good response,? he said. BoI?s credit growth stands at 21% and it is hoping to increase this further. To do this the bank is offering housing loans at a fixed rate of 8% for the first year of loan.
Data released by RBI shows the increase in total credit for the fortnight ended August 27, 2010 was 19.41% year-on-year. This is 75 basis points lower than the year-on-year growth registered in the previous fortnight ending August 13, 2010. However, compared with the fortnight ended August 13, 2010, banks lent less to the extent of Rs 13,115 crore.
Meanwhile, the growth in deposits with banks inched up by 32 basis points to 14.45% at Rs 46,70,237 crore during the fortnight ended August 27, 2010. In the previous fortnight ended August 13, 2010, the increase in deposits had been at 14.13% at 46,31,579 crore.
Narendra said, ?With the so-called busy season coming up, rate of deposits will definitely increase and once the government starts spending, it will also help boosting deposits. We expect 20% deposit growth in 2010-11.