Non-food credit, or loans given by banks to companies and individuals, grew at a subdued 11.16% year-on-year, for the fortnight ended November 14, taking the outstanding credit in the system to Rs 61,47,091 crore, according to RBI data. The increase in non-food credit for the fortnight ended October 31 had come in at an equally dull 11.27% y-o-y.
Meanwhile, growth in deposits came in at 12.16% y-o-y, taking total deposits to Rs 82,53,630 crore. While time deposits grew at 11.96% y-o-y to Rs 75,12,964 crore, demand deposits were up 14.24% y-o-y at Rs 7,40,675 crore.
Credit growth, which had plummeted to a decade low of 9.8% in the fortnight ended September 5, has picked up in subsequent fortnights. With few takers for project loans, however, much of the disbursements relate to working capital. However, several corporates have been tapping other means of cheaper funding, such as the commercial paper (CP) market for their needs. With project sanctions having dropped by a sharp 32% in FY14, demand for project loans is unlikely to be very high this year.
After announcing State Bank of India’s results for the second quarter, chairman Arundhati Bhattacharya had observed that it could be a while before demand for credit picked up meaningfully.
Demand for retail loans had been fairly subdued in the festive season, bankers said. With liquidity ample, banks have been lending even to AA-rated corporates at the base rate.
The base rates of most banks are in the region of 10-10.25%. Some firms have tapped the bond market where AAA-rated firms can raise 10-year bonds at anywhere between 9.40% and 9.60%.