Non-food credit growth stays sluggish at 9.65%

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Mumbai | Updated: September 17, 2015 12:58:50 AM

Non-food credit offtake of banks continued to remain sluggish with disbursals growing 9.65% year-on-year as of July 24, data from the Reserve Bank of India showed.

Non-food credit offtake of banks continued to remain sluggish with disbursals growing 9.65% year-on-year as of July 24, data from the Reserve Bank of India showed.

Outstanding loans of the banking sector stood at Rs 65.47 lakh crore as of July 24, a fortnightly fall of Rs 15,157 crore and a fall of 3.16% so far in the financial year.

Most banks have scaled down their credit growth targets for 2015-16 given the sharp decline in growth during 2014-15. Most public sector banks’ targets now hover in the 12-14% band while private banks continue to forecast a more robust 18% growth.

The sharp deceleration in credit growth has been on the back of stagnation in demand from corporates amid a pile-up of bad loans.

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Lenders, such as Canara Bank, have witnessed no growth in their corporate loan book and depended heavily on retail loan growth. The loan growth driver has been the retail segment with most banks posting double-digit growth in their portfolios. Loans to micro, small and medium enterprises, too, have grown at a healthy pace for some banks, thus supporting credit growth.

The sharp shrinkage in outstanding loans of the banking system since the beginning of FY16 has also been on the back of aggressive disbursals of short-term loans to shore up balance sheets in the last fortnight of the previous fiscal. Most of these loans were repaid during the first quarter. In the fortnight ended April 3, banks disbursed R2.66 lakh crore worth of loans, the highest fortnightly disbursal on record. Deposits have fared better with a year-on-year growth of 11.75% to an outstanding of R88.83 lakh crore as of July 24.

While calculating the credit and deposit growth during a financial year, the RBI considers the loan book as of the last Friday of the year (March 20 in the case of 2014-15), which, in most cases, tends to avoid the last-minute massive additions by banks to their loan book. If one considers this method, non-food credit offtake has grown a measly 1.84% until July 24.

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