A growth in loans gain pace

In October banks showed very slow growth in lending out loans. Last fortnight banks gathered pace especially on the back of the retail loans. According to the report released by RBI loans extended by banks to corporates, individuals and other businesses rose by Rs 37,447 crore during the fortnight ended November 2007, taking the outstanding non-food credit figures to Rs 20,27,459 crore.

Even the loan for food procurement by the Food Corporation of India (FCI), rose by close to Rs 850 crore during the fortnight. Total bank loans rose by Rs 38,301 crore to Rs 20,64,180 crore, in contrast to the growth in October which was almost flat.

It would be too premature to go for conclusion as there is a strong revival in credit growth. According to bankers many corporates, which sought sanctions in the previous fortnights, are utilizing their credit limits. Besides, there are companies which even announce a token expenditure on projects on the ‘auspicious occasion’ of Diwali.

This is true in case of personal and other retail loans also. Many banks had revealed limited period offers. For example, some banks had announced waivers on processing fees on home loans until Diwali and also some concessional rates on specific retail loans. It is likely that many individuals could have availed of these offers at the last minute.

Bankers are of view that yet a strong revival in loan demand has to come from corporates, but certain pockets like infrastructure are seeing an above-the-trend-growth rate in loans. Besides, in home loans which have emerged as a strong area of growth for banks, many borrowers are waiting for cues on the direction of interest rates. Many expect banks to cut interest rates on home loans too.

In other developments, aggregate deposits rose by Rs 41,372 crore during the fortnight to Rs 29,19,327.43 crore. Both demand and term deposits recorded a robust growth during the fortnight at Rs 22,166 crore and Rs 19,206 crore, respectively. Part of the rise in demand deposits, which are otherwise seeing a slowdown, could also be due to the festival. Many individuals parked funds in their savings and current accounts to meet their festival expenditure.

Significantly, the period also saw some huge growth in retail sales not only in large metros, but also tier-II cities. Bank investment in government and other approved securities touched Rs 9,48,346.01 crore by November ‘09, down Rs 944.99 crore over the previous fortnight’s levels.