Banks step up corporate lending

India Inc makes up 41% of non-food credit between March and August 2007 as retail loan offtake slows.

With the retail loan demand slowing down, banks are stepping up corporate financing. The non-food credit has grown by Rs 13,981 crore between March and August 18, 2007.

Of this, about 41 per cent is absorbed by industry compared with 33 per cent in the corresponding period last year, according to the Reserve Bank of India (RBI) in its report on macroeconomic and monetary developments ahead of its mid-term review of the monetary policy 2007-08.

The expansion of incremental non-food credit to industry during this period was led by infrastructure (power, port, telecommunication), textiles, iron and steel, engineering, petroleum, food processing, chemicals, vehicles and construction.

The infrastructure sector alone accounted for around 27 per cent of the incremental credit to the industry as compared with 21 per cent in the corresponding period of the previous year. The bank credit to the infrastructure sector increased by 32.1 per cent to Rs 37,509 crore on August 17, 2007. The agricultural sector absorbed around 13 per cent of the incremental non-food bank credit growth.

Bank credit to the commercial sector has seen some moderation during 2007-08 so far from the strong pace of the previous three years. Scheduled commercial banks' (SCBs) non-food credit expanded by 23.5 per cent, year on year, as on October 12, 2007, compared with 28.4 per cent at March-end 2007 and 30 per cent a year ago.

Personal loan grew by 19.8 per cent to Rs 76,649 crore within which banks lending to the housing sector grew by 16.6 per cent to Rs 33,489 crore.

Personal loans accounted for nearly 22 per cent of the incremental non-food credit within personal loans and the share of incremental housing loans stood at 44 per cent. The outstanding in credit card receivables grew by 45.9 per cent to Rs 4,786 crore. Bank credit to real estate has also seen a moderation.

Credit flow to the real estate sector grew by 52.9 per cent year on year to Rs 16,145 crore as on August 17, 2007, as against 80.1 per cent growth to Rs 13,262 crore as on August 16, 2006.