Though the growth in non-food credit in the first five months of this fiscal is close to 11 times that in the corresponding period of the previous fiscal, bankers aver that most of it is on account of working capital loans and retail credit.
Term loan offtake for setting up greenfield projects has almost come to a standstill as the economy is reeling under overcapacities in almost all sectors.
Non-food credit offtake, which is a barometer of the appetite for corporate and retail credit, in the financial year so far (April 1, 2002 to September 28) was at Rs 66,317 crore as compared to Rs 6,275 crore in the same period in the previous year.
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According to Bank of Baroda (BoB) chairman, P S Shenoy, of the loans currently being extended by banks, term loans account for only around 30 per cent while the remaining credit offtake is into working capital loans and retail credit.
Increasingly, balance sheets of banks are acquiring a short-term profile and skills of bankers in asset-liability management are being tested. Net interest margins, which in the last couple of years hovered around 3-3.5 per cent, too have come under pressure and currently are pegged at 2.5-3.0 per cent. Such low spreads will require banks to look for increased business volumes, Shenoy added.
Accommodation provided by banks to the commercial sector in the form of investments in bonds and debentures issued by public sector units and private sector companies in the March 22, 2002 to September 6, 2002 period at Rs 4,326 crore was more than double the accommodation provided in the corresponding period last year.
A break-up of the non-traditional means of extending credit (investment by banks in the bonds/debenture issues) to public sector units in the March 22, 2002 to September 6, 2002 period was at Rs 238 crore (Rs 2,020 crore in the same year-ago period) and to private sector companies it was Rs 4,088 crore (Rs one crore).