Non-food credit disbursal of banks could be heading for a quarterly fall if the current trend continues for another fortnight. Non-food credit offtake of banks shrank 3.32% or R2.25 lakh crore between April 3 and June 12, data from the Reserve Bank of India showed.
Outstanding non-food credit stood at R65.36 lakh crore as of June 12, a growth of 9.82% from a year ago and sharply down from R67.62 lakh crore as of April 3.
This fall reflects the sharp increase in repayments of short-term loans given by banks during the last fortnight of 2014-15, in order to shore up balance sheet size.
It is typical of banks to disburse short-term loans to companies during the last few days of a financial year in a bid to show larger balance sheet size. Given that the credit disbursals during the first quarter of a financial year are muted, repayments tend to be higher.
Indeed, in the fortnight ended April 3, banks disbursed R2.66 lakh crore worth of loans, the highest fortnightly disbursal on record.
Data for bank credit and deposit are available from 1993 onwards from the central bank. Most of such loans disbursed are short-term working capital, which are typically repaid within three months.
While calculating the credit and deposit growth during a financial year, the RBI considers the loan book as of the last Friday of the year (March 20 in the case of 2014-15), which, in most cases, tends to avoid the last-minute massive additions by banks to their loan book. If one considers this method, non-food credit offtake has grown by a measly 1% until June 12.
Deposits have fared better with a year-on-year growth of 11.7% to an outstanding of R87.66 lakh crore as of June 12. However, between April 3 and June 12, deposits have fallen R1.63%, or R1.45 lakh crore, data show.