Credit offtake zooms in last 15 days of Feb

There seems to be some year-end activity at banks with non-food credit offtake in the fortnight ended February 29, 2008, going up by Rs 40,000 crore to Rs 22,06,902 crore, as against Rs 793 crore in the previous fortnight.

The infrastructure and corporate sectors, who otherwise would have tapped overseas market for funds, are leading the credit rush, bankers said.

"After remaining low until early February 2008, now bank credit (mostly short-term loans) has moved into high gear. It will remain so till the end of March 2008. This is the normal pattern seen around this time every year," said the director of a public sector bank.

Commenting on the sectors and segments that lead credit demand, a middle-level official with a private bank said, "This year, it is the corporate sector, which is leading the rush since the retail segment (home and personal) is down. The short-term loans will be used for working capital and imports." 
 

ON GROWTH PATH Non-food credit off-take
Rs crore	Fortnight of February
	First	Second
2005-06	15,953	19,925
2006-07	16,714	30,384
2007-08	793	39,988
Source: RBI

The tight credit markets plus high rates abroad have made many Indian corporates borrow locally, said J Akilan, chief representative (India) of Spanish banking group BBVA. Infrastructure companies and state-owned oil companies are in the market for funds. Engineering companies, the iron and steel sector and established textile entities also have a major share in credit.

Asked how the spike in credit growth fits with the overall slowdown seen in year-on-year growth in advances, a senior public sector bank executive said, "The tight monetary policy and higher risk weights have made banks go slow on retail (home) loans."

With state-owned banks submitting annual business plans to the finance ministry, there is pressure on them to meet the targets, and that could be partly responsible for the year-end rush to hand out loans.