Even as credit owed to the banking system crossed the Rs 100 lakh-crore mark, the non-food credit growth slipped to an over three-year low of 7.08% year-on-year (y-o-y) during the fortnight ended January 31, 2020, from 7.14% in the previous fortnight. Data from the Reserve Bank of India (RBI) showed that during the comparable fortnight a year ago, non-food credit growth stood at 14.43%.
According to provisional data released by the central bank on Thursday, outstanding loans to companies and individuals stood at Rs 100.24 lakh crore on January 31, up from Rs 99.23 lakh crore at the end of the previous fortnight.
The deposit growth in the banking system marginally recovered during the fortnight. Deposits with banks grew 9.91% y-o-y to Rs 133.24 lakh crore during the fortnight ended January 31, up from 8.69% in the previous fortnight. During the comparable fortnight of 2019, deposits with banks had grown by 9.63%. The credit deposit (CD) ratio for the fortnight stood at 75.23%, slightly lower than 75.6% at the end of the previous fortnight.
It is noteworthy that credit growth has been trending down even as lending rates of banks fell through 2019 following rate cuts by the RBI. In its latest monetary policy meeting, the rate-setting committee held rates while the central bank resorted to more unconventional means of lowering the cost of credit.
In recent years, banks have come to rely heavily on the retail segment to buttress their growth numbers in the absence of demand from corporates. The scenario is unlikely to change anytime soon, say analysts. In a note dated Thursday, Kotak Institutional Equites said there was little scope for borrowing by corporates for greenfield projects. "Expected disbursements in FY2020, based on sanctions up to FY2019, are quite low at around 1% of loans. Corporates are focusing on reducing leverage levels and/or prefer buying out capacities through IBC," the broking firm said.
Bankers, too, have begun to moderate their growth expectations for the year. Late last month, State Bank of India (SBI) said it was unlikely to achieve its earlier-stated full-year credit growth target of 10%. Chairman Rajnish Kumar said on a post-results call that this was despite the sanctions pipeline being good. "When disbursements happen, our sanctioned working capital limit utilisation will improve. And in March, corporate activity also sees a rise typically, (but) to reach 10% growth at the moment looks difficult," he said.