The growth in the non-food bank credit rose to a five-month high of 7.42% year-on-year (y-o-y) during the fortnight ended August 4, from 7.03% in the previous fortnight. The corresponding figure in the year-ago period was 9.3%. According to provisional data released by the Reserve Bank of India (RBI), outstanding loans to companies and individuals rose to Rs 76.74 lakh crore from Rs 76.36 lakh crore a fortnight ago. The net corporate bonds outstanding at the end of June was Rs 24.81 lakh crore, up 20% from Rs 20.63 lakh crore in June 2016, as per data released by Sebi. Data from the RBI showed that the net outstanding on commercial papers (CPs) stood at Rs 3.58 lakh crore as of July 15, down from Rs 4.03 lakh crore in the previous year. Taken together with outstanding on corporate bonds and CPs, the total outstanding credit in the system adds up to at least Rs 105.13 lakh crore, up 9.4% from Rs 96.1 lakh crore in the comparable period last year.
Outstanding on corporate bonds for July and those on CPs for the latter half of July and August are not available yet. Total bank credit rose 6.65% y-o-y to Rs 77.3 lakh crore, as against a 6.19% growth in the previous fortnight and 9.17% in the year-ago period. Aggregate deposits with the banking system grew 11.15% y-o-y to Rs 107.58 lakh crore, down from Rs 111.16 lakh crore a fortnight ago. This marks the first fall on a fortnightly basis in the banking system’s deposit base in nearly two months.
The credit-deposit (CD) ratio of the banking system, or the proportion of deposits deployed as loans, rose 269 basis points (bps) from the fortnight ended July 21 to 71.85%. Loan offtake has been subdued in recent quarters in an environment of muted private-sector investment. In addition, increased levels of disintermediation have also hurt the demand for bank credit.
Bankers and sector analysts have in recent days made a case for measuring the credit growth in terms of outstanding on loans as well as bonds as better-rated corporates are borrowing increasingly from the money markets. Speaking after State Bank of India’s June quarter results, managing director B Sriram said between June 2016 and June 2017, around Rs 40,000 crore had moved from the bank’s loan book to the markets.
“A large portion of it – about 70% – is in the CPs, or commercial papers. These commercial papers swing between the loan book and the markets depending on price, availability, etc,” he said. During the quarter ended June, while SBI’s domestic non-food advances grew 2.4% y-o-y to Rs 16 lakh crore, its investments in commercial papers rose 86.7% to Rs 59,199 crore and those in corporate bonds rose 26.6% to Rs 57,770 crore. Considering these on a consolidated basis, total assets of the bank grew 4.7% y-o-y.