Non-food credit growth fell to 10.4% y-o-y in the fortnight ended March 6 to R64.26 lakh crore, down from 10.64% in the previous fortnight, RBI data show.
Deposits grew at a slower pace on a year-on-year basis when compared with the last fortnight. Deposits saw an increase of 11.77% y-o-y to R84.62 lakh crore in the fortnight ended March 6 from 11.85% in the previous fortnight. While time deposits grew 11.79% y-o-y to R77.04 lakh crore, demand deposits were up 11.69% at R7.58 lakh crore.
Credit growth, which had plummeted to a decade low of 9.8% in the fortnight ended September 5, picked up in subsequent fortnights thereafter, only to fall again for the last three consecutive fortnights.
The pick-up was largely due to working capital loan disbursals, as project loan sanctions as well as disbursals remained weak, bankers said.
VR Iyer, chairman & managing director of Bank of India, recently told FE that project loan sanctions were only trickling in and the lender’s total corporate loan disbursals stood at just R1,000 crore during April-December.
Bankers also said it would take at least two more quarters for credit growth to pick up reasonably as the recovery was lower than expected.
However, this has not stopped funding access to corporates and many companies are borrowing through commercial papers and corporate bonds given the sharp fall in yields there. An AAA-rated company can borrow at 8.3-8.5% from the bond market for the long term. For the same company, the borrowing rate from banks would be at least 10%, which is the lowest base rate at present.
This trend is likely to continue with companies tapping the commercial paper (CP) and bond market throughout FY15. With demand for retail loans fairly subdued in the festive season too, bankers said loan growth for 2014-15 could be not more than 11%.