After staying below the 15% mark for nine fortnights, non-food growth picked up towards the end of July as corporates were forced back towards banks because of a spike in short-term market borrowing rates. As per data released by Reserve Bank of India on Wednesday, for the fortnight ended July 26, non-food credit growth rose 15.14% year-on-year (y-o-y) to R53,04,098 crore. Bankers see this as a positive trend in an otherwise gloomy macroeconomic scenario.
?RBI?s recent liquidity tightening measures have sent the bond and money markets into a tizzy, pushing up the yields. Due to this, the commercial paper (CP) market has come to a standstill. Corporates and non-banking finance companies have to depend on bank funding which is proving to be cheaper currently,? said Arun Kaul, chairman and managing director, UCO Bank
Along with a pick-up in short-term corporate credit, some pick up has also been seen in the retail and agriculture segments, say bankers
?Demand has surely improved in the second quarter and it is coming largely from the retail, agriculture and the micro, small and medium enterprises. The mid-corporate demand is fine as well. The momentum should continue for the year as well,? AK Verma, general manager and chief financial officer, Bank of India.
Credit growth had slipped below 15% y-o-y in the fortnight ended March 22, 2013, to 14.04% y-o-y. Since then the y-o-y credit growth had been between 13.75% and 14.91%, according to RBI data.
For FY14, RBI has projected credit growth of 15%, 100 bps below the projection.
Despite the recent pick up in working capital demand, bankers remain sceptical since any sustainable pick up in corporate credit is yet to be seen. In the meantime, banks continue to focus on retail loans where demand is relatively stronger.
Meanwhile, deposit growth remained below 14% for the ninth consecutive fortnight. For the fortnight ended July 12, deposit growth was at 13.44% to R70,86,845 crore. Demand deposits grew by 11.97% y-o-y and time deposit grew by 13.59% y-o-y.