After a gap of seven months, non-food credit grew in double digits, reaching 11.13% year-on-year for the fortnight ended December 11, according to RBI data.
Outstanding loans in the banking system stood at R69.66 lakh crore as on December 11 compared to R68.68 lakh crore in the previous fortnight — a rise of R98,184 crore. The rise in non-food credit growth is in line with bankers’ expectations of a pick up in credit offtake in
the second half of the current financial year.
Deposits too have picked up pace, growing at a better 11.46% year-on-year compared with the previous fortnight’s rise of 10.42% y-o-y as on November 27.
Barring the fortnight under review, non-food credit growth in the current fiscal has been subdued not having crossed single digits since the fortnight ending May 15. As on November 27, the outstanding amount had fallen by as much as R1.58 lakh crore since the beginning of the financial year and non-food credit growth stood at 9.94%.
The subdued growth in credit offtake could be partly attributed to companies shifting to the corporate bond market for borrowing purposes due to lower interest rates. Between April and November, firms have mopped up close to R2.86 lakh crore through the corporate bond market, indicating a shift from bank borrowing. At present, a AAA-rated public sector unit can issue ten-year bonds at a yield close to 8.25%.
Banks have been cutting deposit rates since October last year with most lenders paying close to 7.50% 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. RBI has reduced the repo rate by 125 bps in CY15 and banks have brought down their base rates by a maximum of 70 bps.
The lowest base rate in the banking system as of now stands at 9.3% of State Bank of India (SBI) followed by HDFC Bank at 9.35%.