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Rediff.com  » Business » Bank credit growth falls below 10% after 5 years

Bank credit growth falls below 10% after 5 years

By BS Reporter
September 18, 2014 11:27 IST
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BankBank credit had last grown at a  sub-10% rate in October 2009 (9.01%).

For the fortnight ended September 5, annual credit growth in the banking system fell to 9.68 per cent, data released by the Reserve Bank of India showed.

This was the first time since October 2009 (9.01 per cent) that growth in bank credit fell below 10 per cent.

R K Dubey, chairman & managing director of Canara Bank, said corporate credit demand was yet to pick up, despite an improvement in the economy.

“Though the retail and small & medium segments have been growing, corporate demand has been slow.

"We are yet to see signs of a pick-up,” he said.

Indian Bank’s Association Chief Executive M Tanksale said the data reflected a slack season.

He added none of the stalled projects had been revived so far.

For a revival, banks have been betting on the coming festive season, with several lenders rolling out products from August.

But, as the data show, the initial demand for such promotional offers has been tepid.

Bankers said though there were some signs of a recovery, as growth in gross domestic product had risen to 5.7 per cent for the quarter ended June, these were yet to translate into a rise in demand for loans, especially from firms.

In the quarter ending this month, however, they expect “genuine credit demand” from the infra segment.

While there were no new projects, bankers said they expected corporate demand for additional working capital and refinancing.

The country’s largest lender, State Bank of India, has cut deposit rates, as it has abundant liquidity and has seen a slower-than-expected credit pick-up.

A senior bank executive said deposits had been growing at a healthy 13-14 per cent, while credit growth, at just seven per cent, was tepid.

In an interview with Business Standard, SBI Chairman Arundhati Bhattacharya had indicated the bank’s credit growth in 2014-15 might be under 15 per cent.

On the deposit front, it seems the banking system is flooded with liquidity -- in the fortnight ended September 5, deposits rose 13.78 per cent over a year ago.

At a pre-policy review meet, lenders had urged RBI to cut the repo rate to fuel loan growth.

But  RBI Governor Raghuram Rajan earlier this week said no action could be expected on that front, as inflation was still above the central bank’s comfort zone.

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BS Reporter in Mumbai
Source: source
 

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