Credit growth stays subdued at 9.79% despite festive spirit

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Updated: October 29, 2015 2:10:40 AM

Indian banks’ non-food credit growth remained below 10% mark even as the so-called busy festival season has set in from October.

Indian banks’ non-food credit growth remained below 10% mark even as the so-called busy festival season has set in from October. Data from the Reserve Bank of India showed that outstanding non-food credit stood at R66.88 lakh crore as of October 16, a growth of 9.79% from a year ago.

However, the growth rate has picked up from 9.45% seen in the previous fortnight. With bank loan growth remaining flat in April-September, most banks are betting on a robust growth during October-March period in order to meet their annual targets.

Bank credit has remained flat during April-September with banks having disbursed only around R27,000 crore during this period.

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The RBI’s baseline forecast for credit growth in 2015-16 is 12.5%, which is also the median of a survey of professional forecasters conducted by the central bank, according to the monetary policy report released last month.

Considering that loan demand from companies remains tepid, banks will face a tough task to meet the credit growth forecast. Banks are heavily depending on the retail segment, especially during the festival season, for credit growth pick-up. Many banks have already announced special schemes to attract customers besides cutting their base rates after the latest round of policy rate cuts. Base rates have been slashed by 70 basis points so far in 2015.

Meanwhile, deposit growth also remained sluggish at 11.18% and outstanding deposits were R90.73 lakh crore as of October 16. 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.

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