The Hindu Business Line : Incremental bank credit growth slows down

Mumbai, April 11 The incremental growth in net bank credit for the year 2007-08 is lower at 23 per cent against 29 per cent in 2006-07, according to the Reserve Bank of India figures.

The increase in non-food and food credit in fiscal 2007-2008 was Rs 4, 42,365 crore. Between April 2006 and March 2007, it had registered an increase of Rs 4, 31,147 crore.

Credit growth has also slowed down in the recently concluded fiscal.

The total bank credit for 2007-08 was Rs 23, 48,493 crore against Rs 19, 28,913 crore last year, working out to a growth of almost 22 per cent. Against this, the credit growth in 2006-07 was almost 28 per cent.

Most bank officials feel that given the high inflation figures, the slowdown in credit and the surplus money supply in the system, the RBI is likely to hike the Cash Reserve Ratio. Hiking key interest rates such as the reverse repo would put additional pressure on banks, but a hike in CRR would help suck out the surplus liquidity from the system, said bankers. Incidentally, for the last fortnight of the fiscal ended March 28, the net bank credit saw a huge increase of Rs 75,891 crore.

This is about Rs 20,000 crore higher than the corresponding period in the previous year.

According to a senior bank official from a public sector bank, this sudden increase is not only due to window-dressing. The last fortnight of March saw a lot of tax outflows, which is charged to the cash credit accounts of corporations and therefore, gets reflected in the non-food credit, he said.

A lot of corporations, particularly oil companies, also exercised the last of the loans sanctioned to them, which also added to the credit during this period, he added.

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