The rate of growth in non-food credit shrank in March, falling to 6.44% year-on-year (y-o-y) for the fortnight ended March 12, from 6.58% in the previous fortnight. Only a month ago, during the fortnight ended February 12, the non-food credit growth stood at 6.61%.
As on March 12, outstanding non-food credit stood at Rs 107.29 lakh crore, showed data released by the Reserve Bank of India (RBI). Issuances of commercial papers (CPs) fell during the fortnight ended February 28 to Rs 69,500 crore, from Rs 88,216 crore during the previous fortnight. The CPs outstanding declined to Rs 3.91 lakh crore from Rs 3.99 lakh crore as on February 15.
Deposits with banks continued to grow in double digits and stood at Rs 149.56 lakh crore, up 12.12% YoY. The credit-deposit ratio was 71.74%.
Though the weighted average lending rates on fresh loans of banks have fallen 122 basis points (bps) from January 2020 to January 2021, the overall credit growth continues to moderate due to risk aversion and continued parking of excess liquidity with the RBI, Care Ratings said. “Also, de-growth in large industries and slower growth in housing and NBFCs (non-banking financial companies) segment restricted the overall bank credit growth,” the rating agency said, adding that an increase in credit outstanding is anticipated as year-end transactions are likely to push up bank credit.
In early March, Crisil said in the current fiscal, bank credit is seen rising 4-5%. This is a revision of the rating agency’s projection from June 2020, when they had expected the bank credit growth to be 0-1%.
In FY22, Crisil expects the bank credit to bounce back to 9-10% levels, driven by a pick-up in corporate credit, the government’s infrastructure push and a likely revival in demand. Retail lending, a major driver of bank credit in the past, is expected to slow down to 9-10% this fiscal before returning to the mid-teens growth of past years.
