Growth in non-food credit improved to 6.39% year-on-year (y-o-y) during the fortnight ended May 12 from 5.07% in the previous fortnight, according to data released by the Reserve Bank of India (RBI). Outstanding loans to companies and individuals, which had dropped below the Rs 75-lakh crore mark to Rs 74.9 lakh crore in the fortnight ended April 28, recovered to Rs 75.7 lakh crore.
Total bank credit rose 5.57% y-o-y to Rs 76.29 lakh crore, as against a 4.33% growth in the previous fortnight.
Aggregate deposits with the banking system grew at 11.85% to Rs 106.42 lakh crore.
The credit-deposit (CD) ratio of the banking system, or the proportion of deposits deployed as loans, fell 11 basis points (bps) from the fortnight ended April 28 to 71.69%.
The credit growth was subdued in recent quarters in an environment of muted private sector investment. In addition, increased levels of disintermediation also hurt demand for bank credit.
Analysts expect retail loans to continue to support the credit growth as corporate demand remains subdued. However, the overall credit growth is also expected to recover in coming quarters. In a note dated May 2, Nomura said, “Adjusting for growth in these sectors (infrastructure, metals and textiles), overall system credit growth in the high-growth period of FY08-14 would have been just 12-13%. From an effective 5% y-o-y increase in FY17, we forecast growth to pick up to 8-10% over FY18/19F (including bonds/ECBs) reflecting the deleveraging cycle.”
Banks themselves expect growth to be driven by retail. ICICI Bank chief executive Chanda Kochhar had told reporters after the bank’s Q4 results, “Looking ahead for FY18, we expect domestic loan growth to be around 15-16%, driven by 18-20% growth in the retail segment and about 15-20% growth in the SME segment.”