Demand for working capital and home loans helped the banking system log higher credit growth in the first two months of the current financial year compared with the corresponding year ago period. In the first two months, the banking system’s deposit growth was lower as compared with the corresponding year ago period.
Bank deposit growth was at Rs 2,18,086 crore during the period (against Rs 2,33,761 crore). In the fortnight ended May 31, the banking system saw deposit accretion of Rs 92,602 crore.
Bank credit saw an incremental growth of Rs 1,18,053 crore during the period, against Rs 1,02,413 crore in the year ago period, according to Reserve Bank of India’s scheduled banks statement of position for the fortnight ended May 31. In the fortnight ended May 31, the banking system saw credit offtake of Rs 49,846 crore.
In other words, 42 per cent of the incremental credit growth in first two months of the current financial year happened in the reporting fortnight. Bankers say credit portfolios of banks typically see de-growth in April as the short-term loans they give in the run-up to the financial year-end for building balance-sheet bulk are paid-off. However, May onwards banks make efforts to push credit.
RK Bansal, Executive Director, IDBI Bank said that though there is demand for working capital loans, the bank has not seen much demand for project loans.
Currently, it is focusing on priority sector loans that is loans to segments such as homes, micro and small enterprises and agriculture. The incremental credit growth in the first two months comes even as the economy is facing headwinds in the form of lower factory output as underscored by the latest index of industrial production (IIP) number and higher consumer price index-based (CPI) inflation.