Signs of credit pick-up are gradually emerging in the so-called ‘busy season' for banks, going by Reserve Bank of India's latest data.
In the fortnight ended October 7, 2011, scheduled commercial banks disbursed loans aggregating Rs 55,443 crore, against Rs 18,860 crore in the preceding fortnight ended September 23.
According to bankers, capital expenditure proposals for setting up new projects and expanding capacities are not coming up due to high interest rates. However, there is good traction in working capital loans and also retail loans to an extent.
Bankers are laying much store by the busy season, beginning October 1 when there is a spurt in economic activity triggered by farmers spending the income they receive from harvesting kharif (autumn) crop and also on account of festival spending.
Companies are not coming up with fresh investment plans. The loan pick up that has happened in the financial year so far is only due to old sanctions getting translated into disbursements, said Mr N. S. Venkatesh, Chief General Manager, IDBI Bank.
Loans given by banks have grown at a slower clip this year due to rising interest rates and overall slowdown in demand for goods and services. In the financial year so far, they gave loans aggregating Rs 2,09,938 crore, against Rs 2,28,600 crore in the corresponding period last year.
In the last 18 months, lending rates have risen by about 275 basis points (1 per cent change equals 100 basis points) in sync with the Reserve Bank of India's tight monetary policy stance to fight inflationary pressures.
Currently, the average base rate (or the minimum lending rate) of banks is around 10.75 per cent, against 8 per cent in July 2010.
Deposits
Deposits grew by a robust Rs 95,665 crore in the reporting fortnight, against Rs 8,232 crore in the preceding fortnight.
At a time when investment in stock market is not fetching good returns, gold prices have run up substantially, and returns on small savings schemes have turned unattractive, banks are seeing good accretion in deposits, especially fixed deposits, due to attractive interest rates, said Dr Brinda Jagirdar, General Manager, State Bank of India.
In the financial year so far, banks saw deposit accretion aggregating Rs 4,20,229 crore, against Rs 3,01,736 crore in the corresponding period last year.
Credit-Deposit ratio
With deposit growth outpacing credit growth, the incremental credit-deposit of scheduled commercial banks in the financial year so far is down to 50 per cent, against 76 per cent in the corresponding year-ago period.