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Bank executives said interest rates in short term money market segment have risen sharply and market has almost come to a grinding halt. Many companies have stepped up use of sanctioned loan limits to meet fund requirements. Oil companies and coal importers have been prominent is drawing credit. Oil companies have drawn Rs 20,000 crore in form of loans.
State Bank of India chairman Pratip Chaudhuri said this sharp rise (in credit) was expected. Companies have moved away from commercial paper and External Commercial Borrowings (ECB).
The outstanding bank credit at end of August 10, 2013 was Rs 55, 09,063 crore, showing a 16.6 per cent year on year growth in credit, according to Reserve Bank of India data.
M Narendra, chairman and managing director, Indian Overseas Bank said besides corporate demand, the good monsoon has given push for crop loans.
The spurt is temporary and may normalize over period subject to liquidity conditions.
Till early July they raising funds through commercial paper as rates were cheaper in short term money market compared to bank loan rates. But scenario changed after RBI took steps to curb liquidity to halt slide in rupee value.
The money market rates have gone beyond base rate of banks. As a consequence the demand shifted bank sanctioned credit.
Banks advances rose by Rs 6,861 crore to Rs 54,05,248 crore in the fortnight ended July 26, 2013.
The deposits grew by Rs 16,849 crore in the fortnight to Rs 71,03,694 crore. The deposit growth in 12 months ended August 10, 2013 was 13 per cent.
