Some bankers feel the recent spur in credit offtake does not reflect an industrial revival.
According to them, corporates have only identified a new way of making money by taking advantage of the abnormal short-term interest rates and a liquidity squeeze in the money markets.
"What has changed fundamentally in the past one month that has resulted in the corporates making a beeline for bank credit," an official with a private sector bank asks. "It is only an artificially propelled spur in credit offtake," he said.
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Corporates are borrowing only for generating quick returns by deploying funds in the money markets for short periods, he said.
According to the weekly statistical supplement of the Reserve Bank of India (RBI) for the fortnight ended January 16, the non-food credit increased by Rs 6,657 crore, while demand deposits of the banking sector decreased by Rs 658 crore.
There has been a greater increase in the bank advances and a heavier fall in deposit mobilisation in the subsequent week, he said adding, "Corporate houses are borrowing and withdrawing their deposits with the banks to park them in open-ended mutual funds."
The call money rate averaged 54 per cent for the shortened reporting week ended January 29.
Both corporates and mutual funds turned into major lenders in the market.
Many mutual funds have lent heavily in the call money markets and high yield treasury bills at rates as high as 140 per cent.
Dealers said mutual funds made hay while the banks became net borrowers in the market after RBI's measures to tighten liquidity made them scramble to cover positions and avoid defaults.