Non-food credit growth remains subdued at 10.4%

By: |
Mumbai | Published: May 28, 2015 12:12:01 AM

Deposit growth stood at 11.85% in the fortnight ended May 15. While time deposits have grown 12.05% y-o-y in the fortnight to Rs 79.51 lakh crore, demand deposits grew 9.84% y-o-y to Rs 7.87 lakh crore

Indian banks’ non-food credit registered a 10.41% growth year-on-year to Rs 65.20 lakh crore in the fortnight ended May 15, according to Reserve Bank of India (RBI) data published on Wednesday.

It being the first quarter of the financial year, loan offtake remained subdued and most banks expect a pick-up in disbursals only in the second half of 2015-16.  Non-food credit grew 10.72% y-o-y in the previous fortnight.

Public sector banks are targeting a loan growth of 12-13%, while private banks have forecasted a faster 18% growth for the year.  The drivers of loan growth are expected to be retail and small and medium enterprises, similar to the previous years. However, an expected pick-up in corporate loan disbursals could also boost credit growth this year.

Meanwhile, deposit growth stood at 11.85% in the fortnight ended May 15. While time deposits have grown 12.05% y-o-y in the fortnight to Rs 79.51 lakh crore, demand deposits grew at 9.84% y-o-y to Rs 7.87 lakh crore. Loan disbursals had grown a measly 8.6% in 2014-15, a 22-year-low, while deposit growth had plummeted to a 51-year-low of 11.42%.

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Dismal project loan sanctions had dragged the expansion in corporate loan book of many banks and the rise in bad loans had also rendered banks cautious.

Lack of loan demand from companies has not only been due to no incremental capital expenditure, but also because many companies have turned to more lucrative and cheaper borrowing options, such as bonds.

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