Non-food credit, or loans to individuals and companies, grew by 14.63% year-on-year during the fortnight to July 5 to Rs 96.26 lakh crore — the highest growth in the past 12 fortnights. During the comparable fortnight a year ago, the non-food credit growth of scheduled commercial banks stood at 12.73%, data from the Reserve Bank of India (RBI) showed.
Meanwhile, deposits in the banking system grew by 10.32% y-o-y to Rs 126 lakh crore during the fortnight ended July 5 — the highest growth in the past three fortnights, and an increase of 30 basis points (bps) over the previous fortnight. Bank deposits grew by 8.36% during the same fortnight last year. Over the past fortnights, the rate of deposit growth had been a matter of concern.
Bank credit in India is expected to grow at 13-14% on average between FY19 and FY20, significantly faster compared with 8% in FY18. That would force a change in the deposit mobilisation plans of banks over the medium term, said experts at Crisil Ratings. To meet this credit growth, banks will have to raise about Rs 25 lakh crore over the two fiscals, the experts said.
A senior banker with a private-sector bank said credit growth could increase further as banks are beginning to pass on the benefit of the rate cut, but it will take another 6 months for transmission to happen. In July, commercial banks such as SBI, ICICI bank and Bank of Baroda have cut their marginal cost of funds based lending (MCLR) rate by 5-10 bps.
Certain scheduled commercial banks have witnessed a substantial increase in their advances portfolio in Q1FY20. For instance, IndusInd Bank and Federal Bank which have come out with their Q1 results posted a rise in advances of 28% and 19% y-o-y, respectively. IndusInd bank MD & CEO Romesh Sobti said majority of their advances growth came from the corporate loan portfolio which grew by 46% y-o-y.