The Hindu Business Line : Non-food credit offtake rises by Rs 40,000 cr

Mumbai, March 14 Non-food credit increased for the fortnight ended February 29 by Rs 39,988 crore to touch Rs 22,06,902 crore, according to the Reserve Bank of India’s Weekly Statistical Supplement.

In the previous fortnight, non-food credit had increased only by Rs 793 crore to touch Rs 21,66,913 crore

As on February 29, net bank credit increased by Rs 41,481 crore to touch Rs 22,51,213 crore. Food credit increased by Rs 1,493 crore to touch Rs 44,311 crore.

The fourth quarter of the fiscal is typically when banks see growth in credit as they meet their business targets. “A slackening in credit is usually seen after April. As of now, our credit growth is quite comfortable,” said a senior official from a leading public sector bank.

Seasonal activities

Another reason for the increase in bank credit is seasonal activities in the busy season, which is from October to March. There could be a demand from seasonal industries such as cotton and sugar in the second half.

Although the Index of Industrial Production data for January 2007 showed a slight slowdown, most bank officials feel this is a temporary aberration and is in no way indicative of a long term slowing down.

The IIP data for January 2008 showed that the overall index grew by 5.3 per cent against 11.6 per cent growth in January 2007.

Overall growth

A PSU bank official, who would not like to be quoted, said that there is overall growth in the economy, with corporates borrowing to meet their targets in this fiscal.

“Many corporates borrow in the second half to meet their capacity expansion targets. The industry saw an average credit of 21 per cent in the first half and this is likely to be maintained the second half as well,” he said.

According to data presented in Parliament, last week, there was a slowdown in non-food credit in the first three quarters of the fiscal, but it picked up in the fourth quarter.

Non-food credit extended by banks increased by Rs 2,22,842 crore (11.8 per cent) up to January 8. As per provisional information, up to November 2007, credit to industrial sector recorded the highest growth - 25.3 per cent, followed by agriculture sector – 21.4 per cent, services sector – 20.8 per cent and personal loans-20 per cent.

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