RBI concern over fall in bank credit offtake

The Reserve Bank has identified three factors that triggered the sharp fall in credit offtake last year. They are sluggish industrial growth, attractiveness of investments in government papers and growing NPAs of banks.

Bank credit in the last fiscal posted a growth of Rs 24,387 crore (9.6 per cent) in sharp contrast to Rs 42,454 crore credit growth (20.1%) in previous year.

Although food credit declined marginally by 2,194 crore – compared with Rs 2,483 crore in the previous year – the expansion in non-food credit at Rs 26,581 crore was sharply lower than that of Rs 44,938 crore in 1995-96, the report noted. The scenario would have been worse but for the petroleum companies’ increased access to bank credit, triggered by the burgeoning oil pool account deficit.

The banking industry’s exposure to oil companies increased from Rs 1,510 crore in 1995-96 to Rs 3,375 crore last year. Excluding petroleum credit, the increase in non-food credit was to the tune of Rs 24,716 crore in the last fiscal, down from Rs 44,050 crore in 1995-96.