Non-food credit growth has again started to decline, with the same falling below double digits for April 29 at 9.31%. It was in November 2015 when the non-food credit growth was last seen in single digit (9.94%).
The Reserve Bank of India (RBI) data showed that the outstanding non-food credit as on April 29 stood at Rs 71.56 lakh crore, a dip of Rs 2.72 lakh crore from the beginning of April. As on April 1, the outstanding non-food credit stood at Rs 74.28 lakh crore.
The deposit growth has also equalled the non-food credit growth at 9.32% on a year-on-year basis with the outstanding deposit in the banking system standing at R95.77 lakh crore.
Credit growth had started to overtake deposit growth a few months back. Growth in non-food credit in the banking system as on December 25 stood at 11.2% compared to the deposit growth at 10.88%. Since then, the trend seems to have continued.
The lowest base rate in the banking system currently stands at 9.30%, while a AAA-rated PSU can borrow at rates close to 8.20%.
Even short-term rates in the debt market are way lower than the bank lending rates. For example, the marginal cost of lending rate (MCLR) for three years for a state-owned bank stands at 9.35% where as PSUs are able to borrow at sub-8% levels from the debt market via three-year papers.
Bond market arrangers indicated that Power Finance Corporation (PFC) recently raised close to Rs 1,900 crore via three-year paper at 7.96%.
Banks, however, have an advantage when it comes to low-rated borrowers as these companies usually do not find much investor interest in the debt market.