The growth in non-food credit so far in 2004 has been the highest in the past decade. Non-food credit till February 20 was higher by Rs 10,429 crore (Rs 104.29 billion), or 49.5 per cent, compared with the same period last year, and 174 per cent higher than in the corresponding period of 2002.
Bankers said the rapid rise in non-food credit was a result of the continued growth in retail lending as well as a pick-up in corporate and infrastructure loans. They also pointed out that the rise in credit reflected the robust growth in the economy.
The spurt in non-food credit took place in the second half of 2003-04, but the total credit growth for the whole year is still lower than last year.
For instance, non-food credit rose Rs 95,961 crore (Rs 959.61 billion) in 2003-04 up to February 20, compared with Rs 123,511 crore (Rs 1,235.11 billion) in the corresponding period of 2002-03.
The rise in non-food credit, however, has not led to a rise in interest rates. The main reason is that the growth in bank deposits has kept pace with the rise in credit, keeping banks flush with funds.
For example, bank deposits grew Rs 49,964 crore (Rs 499.64 billion) between December 26, 2003, and February 20, 2004, compared with a growth of Rs 13,154 crore (Rs 131.54 billion) in the corresponding period of 2002-03. In the same period of 2001-02, bank deposits grew Rs 16,681 crore (Rs 166.81 billion).
The robust growth in deposits helped banks to fund the increased credit offtake easily, without affecting liquidity. Moreover, banks placed over Rs 40,000 crore (Rs 400 billion) worth repos with the Reserve Bank.
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