It may be a lean season but both companies and individuals seem to be willing borrowers as reflected in data put out by the The Reserve Bank of India (RBI).
This is despite the fact that money has become more expensive after the central bank increased key policy rates by 50 basis points at its meeting in early May.
Non-food credit growth for the fortnight ended May 20, 2011, grew a strong 22% y-o-y to R38, 85,557 crore compared with a growth of 22.7% year-on-year in the previous fortnight ended May 6.
However, banks lent R12, 802 crore less during the fortnight ended May 20 on a sequential basis.
In the fortnight to May 6, banks had lent R22,987 crore incrementally.
The RBI has projected a non-food credit growth of 19% for 2011-12 with the growth in deposits projected at 17%.
Following the central bank?s move to tighten monetary policy, most banks had upped their lending rates by 25-50 basis points.
However, the pace of growth in deposits continues to be lower than that for credit. Nonetheless, in the fortnight ended May 20, 2011, the rise was a very encouraging 17.37% year-on-year, to R53,19,256 crore, in line with RBI?s projections.
Banks have been able to attract deposits worth R3,246 crore in the fortnight ended May 20, 2011 whereas in the previous fortnight, there had been a drop of R3,422 crore.
Over the past six to seven months most banks have raised interest rates on deposits while the interest rate on savings bank accounts has been increased to 4%.
Bankers say credit offtake continues to be fairly good despite it being the lean season when business is usually somewhat dull.
?The pace at which credit has grown indicates that there is demand,? says HSU Kamath, ED, Canara Bank, adding that since not too much time has elapsed since the rate hike, it would be premature to gauge the impact.
Some bankers are a tad cautious believing that higher interest rates could keep borrowers away.
?Credit growth could slow down going ahead because of deliberate steps taken by RBI and banks,? said R Bakshi, ED, Bank of Baroda.