The increase in non-food credit moderated to15.3% y-o-y in the fortnight ended February 24, taking the outstanding credit to R4,324,312 crore. In 2011-12 so far, credit growth has been 11.61%, over the corresponding period of 2010-11, with the amount lent at R4,49,936. Since November, 2011, credit growth has been slowing; it 15.4% y-o-yin the fortnight ended February 10, 2012.
The sluggish demand for loans reflects slowing economic activity; moreover banks appear to have become a tad risk averse in the wake of rising non-performing assets. The central bank has noted that non-food credit growth has been generally showing a decelerating trend since December 2010.
However, some bankers are confident of clocking a credit growth of 20% in the fiscal year 2012. ?Because of the deceleration in the economy, the growth in the banking system has come down but Bank of Baroda has done much better than the industry and the peer banks and we expect the credit growth trend to continue at 20%,? said MD Mallya, CMD, Bank of Baroda, while other banks like Corporation Bank is expecting a full year credit growth of 17-18% and Federal Bank is expecting a growth rate of 18-20%.
The banks are repricing their lending rates in order to boost credit growth. While, the State Bank of India, cut rates in its educational category in the last week of February and hinted at more such measures to push up sagging demand. Other public sector lenders like Bank of Maharashtra and Central Bank of India have also slashed home loan rates.
Federal Bank also trimmed its base rate by 10 basis points to 10.65% on the lines of Union Bank of India. They expect the demand to pick up and the rates to move southwards.