With the economy gaining momentum, both companies and individuals are clearly borrowing more. The growth in non-food credit nudged the 17%-mark for 2009-10 (uptil March 26, 2010) crossing the 16% target set by the Reserve Bank of India (RBI). In all, scheduled commercial banks lent Rs 4.62 lakh crore during the year to corporates and retail borrowers. The rise in total credit for the year was around 16.75%. There has been a pick-up in credit over the last 15 days; at the end of the fortnight ended March 12, 2010, the increase in non-food credit had just crossed 16%. Of course, a spurt in both deposits and loans towards the end of the year is not uncommon as banks close their balance sheets for the fiscal year. R K Bakshi, executive director, Bank of Baroda, said, ?A fair amount of short-term lending has been seen in March and that could have pushed up credit growth further. We are reporting a 20% credit growth in 2009-10.? The total credit outstanding with borrowers stood at Rs 32,40,398 crore at the end of March 26, 2010. With the business environment clearly improving, bankers expect the demand for credit to increase by 20-22 % this year. This was indicated by M V Nair, CMD, Union Bank, after bankers had met Reserve Bank of India (RBI) governor D Subbarao on Monday. S Sridhar, CMD, Central Bank of India, said his bank had posted a growth of around 20% in loans last year and expected that this would be higher at around 22% this year. However, O P Bhat, chairman, State Bank of India (SBI), has observed that while customers were borrowing, the demand was still somewhat subdued. ?We are targetting a growth of around 20% in our assets, this year,? Bhat said.

HSU Kamat, executive director, Canara Bank, confirmed that retail borrowers and smaller corporates are looking for money. ?There are more individuals borrowing now and we are seeing a smart pick-up in loans to the SME segment and we have lent around 30% more this year to that space,? he said. Kamat observes that Canara Bank has also seen a sharp rise in lending to the infrastructure space, of 50% last year. B A Prabhakar, executive director, Bank of India, which too has been able to grow its loan book by about 20%, believes that banks would have access to liquidity this year and even if interest rates rose, they would be able to pass it on to borrowers, because demand for credit was picking up. Despite several banks, including Bank of India, IDBI Bank, Union Bank and ICICI Bank raising interest rates on deposits in February, the increase in deposits (time and demand) has been 17.02% year-on-year to Rs 44,86,573 crore at the end of March 26.

At the end of the previous fortnight, the growth in deposits was just over 18%. Central Bank?s Sridhar believes that companies are also able to access overseas markets. In its last monetary policy, the RBI had lowered its credit growth target for the sector in the current fiscal to 16% from 18%.

Deposit growth falls

fe Bureau

In a surprising development, though some banks have raised their deposit rates in recent months, the overall deposit growth has fallen during the fortnight ended on March 26.However the banking industry has seen a steady growth in credit off-take in recent months. The deposit growth has fallen from 18.14% recorded during the fortnight ending on March 12, to 17.01 % during the next fortnight ending on March 26.

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