Credit growth sluggish at 9.78%; lowest in 12 years

Credit growth sluggish at 9.78%; lowest in 12 years
The Financial Express, November 19, 2009, Page 4

fe Bureaus, Mumbai

During the fortnight ended on November 6, bank loans have gone up by Rs 23,148 crore taking outstanding advances to Rs 28,91,713 crore—an increase of over 9%—the slowest growth in 12 years. According to data from the RBI, credit growth stood at 9.78% or Rs 2,57,677 crore, as on November 6, 2009, as against 9.66% through October 23, 2009, on year-on-year basis.

According to the RBI data, deposits grew by 18.56%in the same period. The outstanding deposits at the end of November 6 stood at Rs 41, 67,306 crore against Rs 35, 15,029 crore in the corresponding fortnight a year ago. The deposit growth as on October 23, 2009 stood at 19.02%, or Rs 6, 63,819 crore.

The RBI had noted during the policy that credit growth is unlikely to meet 20% target but projected a growth of 18% for the same. At the same time, aggregate deposits of scheduled commercial banks are projected to grow by 18%. The RBI had urged the bankers to step up their efforts towards credit expansion while preserving credit quality, which is critical for revival of growth.

Crisil, a subsidiary of S&P believes the credit growth will pick up in the second half as there are signs of revival in the economy with higher IIP numbers. “Industrial credit will grow at a moderate pace with strong investments in key sectors. Retail credit has also been improving on a month-on-month basis, particularly in housing and auto loans. The credit demand is expected to grow among consumers to derive benefit of low interest regime and expectation of better growth in income levels,” said the report.