Non-food credit, or loans to companies and individuals, grew at 11.63% year-on-year in the fortnight ended February 5, according to Reserve Bank of India (RBI) data.
As a result, total outstanding non-food credit in the Indian banking system stood at Rs 70.44 lakh crore as on February 5 as compared to Rs 69.88 lakh crore in the previous fortnight — a rise of Rs 56,000 crore.
This rise – the fifth successive week in which non-food credit has grown at over 11% y-o-y – is in line with bankers’ expectation of a pick-up in demand for credit in the second half of the financial year.
However, with hardly
any demand for project loans, this rise in non-food credit is probably a function of demand from the retail segment.
Growth in deposits, however, was slightly lower as compared to the previous fortnight – 11.3% y-o-y as compared to 11.43% y-o-y.
Meanwhile, banks’ loan growth rates are also being affected by the fact that companies are increasingly preferring the corporate bond market as it is more attractive in terms of interest rates.
Between April and December, firms have mopped up close to Rs 3.41 lakh crore through the corporate bond market, indicating a clear shift.
Banks have been cutting deposit rates since October 2014 with most lenders paying close to 7.5% for one-year term deposits. This is lower than the yields offered by various schemes for corresponding periods in small savings schemes of the government.