Consumers lap up bank credit

In the second half of the fiscal since September 2003, the average expansion in non-food credit was Rs 6,900 crore per fortnight as compared to Rs 916 crore per fortnight averaged till August 2003.

The total increase in non-food credit during the fiscal 2003-04 (till February 6, 2004) amounted to Rs 89,975 crore. This level of increase is the highest, compared to the increase recorded in the corresponding period of any fiscal year. However, the preceding fiscal year was an exception when credit expanded by Rs 1,20,135 crore due to the merger of ICICI with ICICI Bank.

A significant demand for credit was reported for housing and personal loans, particularly for purchase of consumer durables and automobiles, according to a recent study by the Centre for Monitoring Indian Economy (CMIE), an independent economic research organisation.

In the manufacturing sector, credit demand was reported from manufacturers of cement, iron and steel, transport equipment, textiles, chemicals and power. Demand for credit from corporates was mainly for captive power plants, for balancing equipment and working capital while credit demand for project investments was poor, says CMIE in its report.

As of February 6, 2003-04, food credit stood at Rs 36,468 crore as against Rs 49,479 crore outstanding credit a year ago. In spite of falling yields, banks invested Rs 1,22,229 crore in government securities (G-secs) during April to February 6, 2003-04, on top of Rs 1,05,869 crore in the corresponding period of 2002-03. Banks’ investment in G-secs stood at Rs 6,45,646 crore as of February 6, 2004.

In the second half of fiscal 2003-04 till January 2004, average investments in G-Secs, however, fell to about Rs 8,000 crore per month as compared to about Rs 14,000 crore per month during the first half. This fall was largely due to lower market borrowings by the Central government in the second half of the fiscal.