Banks’ non-food credit grew 11.16% y-o-y to R61.2 lakh crore in the fortnight ended October 17, RBI data show. Although credit growth has recovered slightly from the five-year low of 9.8% in the fortnight ended September 5, dismal loan demand from corporates kept loan offtake low.
Bankers said firms are yet to hike investments for capital expenditure and, with bond yields lower than banks’ base rates, most firms are meeting working capital needs by borrowing from the bond market.
“Corporates who earlier depended on bank credit are now opting for other debt instruments, which provides them cheaper funds,” said RK Goyal, executive director, Central Bank of India.
Companies have sourced around R3 lakh crore by privately placing bonds and another R21,000 crore through public issuances in 2014 so far. Base rates of most public sector banks are in the 10-10.25% band, while a AAA-rated firm can raise funds through 10-year bonds at a yield of 8.90-9.10%.
Bulk of the credit growth is from the retail sector, bankers said. Meanwhile deposits recorded a growth of 12.59% y-o-y to R82.13 lakh crore. Time deposits grew at 12.44 % y-o-y to R74.70 lakh crore and demand deposits grew at 14.16% y-o-y to R74.37 lakh crore.