Growth in non-food credit declined to 12.57% year-on-year (y-o-y) for the fortnight to September 28 after hitting a near four-year high of 13.61% in the preceding fortnight, data released by the RBI showed.
This suggests companies and individuals are borrowing more compared to the same period previous year, but the growth recorded is slower compared to the previous fortnight.
According to the provisional RBI data, outstanding loans to companies and individuals stood at Rs 89.62 lakh crore on September 28, a mild increase compared to Rs 87.49 lakh crore September 14. A year ago, the outstandings were of the order of Rs 79.70 lakh crore.
The worrying sign from the release was the marginal decline in growth of deposits. Deposits with the banking system grew at 8.07% y-o-y to Rs 117.84 lakh crore as on September 28, against an 8.58% growth for the fortnight ended September 14.
Non-food credit growth has been increasing gradually in recent fortnights even as the base effect of demonetisation has worn off. Since January 2018, fortnightly non-food credit growth has moved between the 10-13.6% range.
Rajkiran Rai G, MD & CEO of Union Bank of India, had highlighted that the bank has seen an increased flow of customers because of a few other banks that are under the prompt corrective action (PCA). “The large corporates are shifting to banks that are taking decisions, our bank is one such bank. The corporate demand is good but we are selective,” Rai said.
A flattish average ticket size is expected out of the data due to a change in the loan mix towards short duration consumer loans like credit cards, personal loans and consumer durable loans; personal loan is the fastest growing segment. The report further highlighted that, Maharashtra, Tamil Nadu and Karnataka account for 40% of the outstanding loans.