Non-food credit growth grew 13 per cent in fortnight ended April 26

Published: May 11, 2019 1:43:24 AM

Non-food bank credit grew a reasonably good 13.13% year-on-year (y-o-y) in the fortnight ended April 26, although somewhat slower than the 14.2% in the previous fortnight, as per the data released by the RBI.

Banks have been concerned about the slowing growth in deposits and have been compelled to raise interest rates on these.

By Vinayak Agarwal

Non-food bank credit grew a reasonably good 13.13% year-on-year (y-o-y) in the fortnight ended April 26, although somewhat slower than the 14.2% in the previous fortnight, as per the data released by the RBI.

Outstanding loans to companies and individuals stood at Rs 95.77 lakh crore at the end of April 26, marginally lower than Rs 96.08 lakh crore on April 12.

Aggregate deposits in the banking system grew 9.7% y-o-y to Rs 124.86 lakh crore as on April 26, a shade slower than 10.6% y-o-y deposit growth in the previous fortnight. Banks have been concerned about the slowing growth in deposits and have been compelled to raise interest rates on these.

“We believe that the low deposit growth is attributable not only to the technical reasons but also to the structural and cyclical factors like a change in household behaviour from saving-focused investor to consumption-focused leveraged consumer,” said anaylysts at Edelweiss research.

SBI on Friday announced a smart increase in loans in Q4FY19 of 12% year-on-year. The ICICI Bank management, while announcing March quarter results, told reporters that loan growth for 2019-20 would largely depend on liquidity, competitive intensity and risk-return payoff. Banks have been cutting their lending rates lately, for instance, SBI on Friday reduced its marginal cost of funds-based lending rate (MCLR) by 5 bps to 8.45% per annum. The retail segment continues to be the key loan-growth driver, particularly personal loans, credit cards and auto loans, Amitabh Chaudhry, MD & CEO, Axis Bank, said recently. “Retail franchise is coming from existing customers and we will continue to leverage on this strength,” Chaudhry added.

Analysts at Kotak Institutional Equities said that the ongoing improvement in the balance sheet of banks can support overall credit growth by offsetting NBFCs’ likely lower disbursements. This was in the context of liquidity problems of NBFCs and possibly solvency challenges of certain housing finance companies (HFCs) dampening credit growth and consumption demand.

The credit-deposit ratio (CD) of the banking system stood at 76.70% in the fortnight to April 26, marginally higher compared to 76.68% in the previous fortnight, led by a decline in deposit growth momentum. In the comparable period last year, the CD ratio of the banks was at 74.37%, showed the RBI data.

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