Non-food credit or the money that banks lend to companies and individuals showed a smart uptick of close to 22% in the fortnight ended November 5, 2010, to Rs 34, 77,042 crore. It is 100 basis points higher than the year-on-year growth of close to 21% seen in the previous fortnight ended October 22.
However, a glance at the lending trends between April 9, 2010 and now, shows credit growth has been rather subdued at just under 9%. Although the 9% number is better than the growth in previous fortnights as seen from the data put out by RBI, the trend suggest that the central bank?s projection of a 20% loan growth for 2010-11 might not materialise. Banks lent an incremental Rs 48,124 crore during the fortnight ended November 5, 2010 to companies and individuals.
Bankers are concerned about the sluggish offtake in credit though the festive season has seen more borrowers. BA Prabhakar, ED, Bank of India (BoI), observed, ?The pick-up in loans is not as strong as expected probably because many companies are raising funds either from the equity market or through external commercial borrowings.
Prabhakar points out that the higher quantum of lending in the fortnight to November 5, 2010 could have been the result of a spike in short-term loans. BoI which extended its special home loan scheme, till December 31, 2010, is seeing credit growth of around 19.6%. ?We expect to achieve 20% credit growth during FY11, with retail demand picking up,? Prabhakar added. MD Mallya, CMD, Bank of Baroda (BoB), said, ?Our bank is targeting a credit growth of 23-24% in 2010-11 though we have been growing at 27-28% so far this year.?
Canara Bank HSU Kamath, ED, said, ?Credit growth is happening mostly in infrastructure sector. Moreover, growth can also be seen in sectors like iron and steel as well as real estate. We expect to grow our book by 22% for the 2010-11 with retail loans in fairly good demand.
Companies are wary of rolling out fresh capacities before they see signs of a recovery in the global economy, say economists adding that high domestic inflation has eaten into the disposable incomes of consumers. SBI chairman OP Bhatt had recently observed that credit growth has been muted.
Meanwhile, deposits continued to grow at a modest pace of 15.34% y-o-y to Rs 48,10,227 crore during the fortnight. The increase was lower than17.32% y-o-y growth recorded during fortnight ended October 22.