Bank credit growth slips below 15 per cent

A high-base effect due to strong credit growth in the year-ago period is the main reason.

Bank credit growth slipped below 15 per cent as total credit outstanding fell by Rs 5,062 crore to Rs 28,01,970 crore during the fortnight ended August 14, data by the Reserve Bank of India (RBI) showed. While bankers said the credit demand remained weak, a part of the decline was attributed to repayment by oil companies and low disbursals of sanctioned loans to the infrastructure sector. On a year-on-year basis, bank credit growth fell to 14.89 per cent in the 15 days to August 14, compared with 15.74 per cent in the previous fortnight.

Bankers said a high-base effect due to strong credit growth in the year-ago period was behind the low figure. In the fortnight ended August 15, 2008, total credit outstanding had grown 25.9 per cent over the corresponding period in the previous year.
 

HEADING SOUTH
Fortnight-ended	Credit flow	Y-o-Y growth	Deposit mobilised	Y-o-Y growth
10-Apr	1,429	18.80	70,726	22.10
24-Apr	-25,266	18.10	21,956	22.50
8-May	5,882	17.20	29,260	22.60
22-May	16,306	15.86	15,730	22.56
5-Jun	21,460	15.70	3,656	22.00
19-Jun	13,006	15.80	-5,502	22.00
3-Jul	28,532	16.30	62,559	21.90
17-Jul	-21,185	15.34	-18,656	21.78
31-Jul	29,471	15.79	59,338	21.79
14-Aug	-5,062	14.89	-9,338	21.80
Figures in Rs crore;   Y-o-Y growth in per cent at the end of fortnight Source: RBI

A senior executive with a public sector bank said there was a decline in demand for working capital loans, though economic activity was picking up.

“The figures do not surprise me because overall credit growth is sluggish. It will take some more time for credit growth to pick up. Sanctions have begun to roll but disbursals should take time,” said Partha Mukherjee, president, corporate banking at Axis Bank.

Bankers expect credit growth to pick up significantly from September. “There are huge sanctions in the pipeline and when these loans get disbursed post-September, credit growth will pick up strongly,” said a senior executive of a public sector bank.

RBI has projected a 20 per cent growth in non-food credit during FY10.
 
During the 14-day period, bank deposits shrank by Rs 9,338 crore to Rs 40,60,052 crore. On a year-on-year basis, bank deposits grew 21.8 per cent. Time deposits fell Rs 13,957 crore, while demand deposits, or deposits with tenures of less than a year, grew by Rs 4,619 crore. The fall in deposits is due to banks shedding high-cost deposits acquired earlier. Since credit off-take is still subdued, banks feel it unnecessary to acquire fresh deposits.

In its first quarter review, RBI had revised the deposit projection to 19 per cent, from 20 per cent estimated earlier.