Non-food credit disbursal shrank by 3.62% in the first two months of FY16, RBI data showed on Wednesday. Outstanding non-food credit stood at R65.17 lakh crore as of May 29, sharply down from R67.62 lakh crore outstanding as of April 3.
That amounts to a fall of R2.44 lakh crore in credit portfolio in two months. Credit disbursals slow down dramatically in the first quarter of a financial year and repayments are typically higher. Further, as banks aggressively lend short-term loans in March to boost balance sheets towards the end of a financial year, such loans come up for repayment in April and May.
Indeed, in the fortnight ended April 3, banks disbursed R2.66 lakh crore worth of loans in the fortnight ended April 3, the highest fortnightly disbursal on record. Data for bank credit and deposits are available from 1993 from RBI.
Both deposit and loan growth tend to jump towards the end of a financial year, as banks look to boost their balance-sheet size. Most of such loans disbursed are short-term working capital, which are typically repaid within three months. The fortnight following the financial
year end sees a fall in credit offtake. Despite this contraction in outstanding loans of banks, y-o-y non-food credit growth was 9.99% as of May 29, lower than 10.72% y-o-y growth seen a fortnight ago. Deposits also grew at a slower pace pace of 11.48% y-o-y to an outstanding of Rs 87.89 lakh crore as on May 29 compared to a growth of 12.31% seen in the previous fortnight.