Non-food credit growth continued to remain in single digit at 9.81% as on fortnight ended September 18 compared to the same period last year, according to the latest Reserve Bank of India (RBI) data.
Outstanding loans in the banking system stood at Rs 66.03 lakh crore as on September 18 compared to Rs 65.99 lakh crore in the previous fortnight — a rise of Rs 3,763 crore. Although the credit offtake is seeing some improvement over the last two fortnights, it has shrunk since the beginning of this fiscal. Since early April, the non-food credit growth has shrunk by 2.34% with the outstanding amount seeing a reduction of Rs 1.58 lakh crore.
A large part of this shrinkage in the banking system can be attributed to the lack of corporate credit offtake. Banks have been depending on retail and SME segments to grow their loan books.
And whatever little credit growth can be seen in the corporate segment has mostly shifted to the corporate bond market. Between April and September, firms have mopped up close to R2.16 lakh crore through the corporate bond market, indicating a major shift from bank borrowing.
The deposit growth has also taken a hit with the growth figure standing at 11.24% on a year-on-year basis while it stood at 11.59% in the previous fortnight.
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%. Now considering that the repo rate has been reduced by 50 bps, corporate bond yields which were 80-100 bps lower than the base rates, are likely to go down even further.