Non-food credit in the banking system grew by 9.01 per cent year-on-year (y-o-y) in the fortnight ended October 14, down from 10.6 per cent in the previous fortnight. Credit growth has been weak over the last few months due to low corporate demand and a lack of fresh investments.
Non-food credit at the end of the fortnight under review stood at Rs 72.7 lakh crore, according to data released by the Reserve Bank of India. Growth in deposits with Indian banks also fell to 10.4 per cent y-o-y, against 11.3 per cent y-o-y in the previous fortnight, to Rs 99.63 lakh crore. In September, the growth in deposits had crossed the Rs 100 lakh crore mark for the first time.
With minimum growth in project loan sanctions, the 9.01 per cent credit growth is most likely a function of demand from the retail segment, something that several large banks have lately been focusing on.
Analysts have said they do not expect material improvement in credit growth for FY17, factoring in an average 12 per cent growth over last year.
Another contributing factor to the slowing demand would be the fact that companies have been moving their borrowings to the corporate bond market due to lower interest rates. While the lowest one-year MCLR is currently 8.9 per cent — after SBI and
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ICICI Bank cut their rates from 9.05 per cent on Friday — the FIMMDA benchmark for AAA rated corporate bonds is at 7.57 per cent. FE