In balance sheet boost, loan disbursals soar

By: | Published: April 18, 2015 12:12 AM

RBI data show banks disbursed R2.66 lakh cr worth of loans in the fortnight ended April 3, the highest fortnightly disbursal on record

Banks have been beefing up balance sheets by disbursing large amount of short-term loans in the last fortnight of the financial year, despite warnings from regulators.

Data from the Reserve Bank of India show that banks disbursed R2.66 lakh crore worth of loans in the fortnight ended April 3, the highest fortnightly disbursal on record. Data for bank credit and deposit are available from 1993 onwards from the central bank.

Bank deposits too jumped by R3.25 lakh crore in the same fortnight. This resulted in deposit growth for FY15  jumping to 12.8% and non-food credit growth rising to 13.16%. A fortnight ago, credit growth had hit a 21-year low of 9.75%, while deposit growth was at a whopping 51-year low of 11.42%.

It has been a common practice among bankers to disburse short-term loans and take large deposits at the fag end of the financial year to boost balance sheet size. The loans are typically working capital with maturity of not more than three months. “The last fortnight is not representative of the credit demand cycle. A large part of it is an aggressive move to increase business,” said an executive at a public sector bank.

But, this time around, faced with plummeting loan disbursals, banks have been hard-pressed to improve balance sheets. With project loan sanctions hardly growing, the only boost to loan growth has come from the retail segment. In the corporate loan segment, the only disbursals have been working capital loans.


“Sanction of term loans was not as good as we would expect it to be. Even on the working capital side — where we have enhancement of limits for the growing requirement of the unit — it is subdued because of the general growth cycle. It has not showed up in the last financial year,” said NK Chari, deputy managing director (mid-corporate) at State Bank of India.

Bankers expect credit growth to improve in 2015-16 as economic growth picks up. “Growth will pick up and we could see 15-16% growth in non-food credit. We expect growth to be about 25%, going forward,” said Romesh Sobti, MD and CEO, IndusInd Bank.

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