Non-food credit growth falls to 17-month low


Non-food credit grew at 11.58% year-on-year (y-o-y) during the fortnight ended August 16, a 17-month low, data from Reserve Bank of India (RBI) showed. The growth in loans to individuals, farmers and companies was was 12.09% y-o-y in the previous fortnight.

However, deposits with the banking system grew by 10.15% y-o-y to Rs 126.80 lakh crore in the fortnight ended on August 16, a slightly faster pace than in the previous fortnight when it grew by a 10.08%. The credit deposit (CD) ratio for the fortnight remained at 75.84% the same as the previous fortnight.

Outstanding loans stood at Rs 96.17 lakh crore as on August 16, down from Rs 96.66 lakh crore in the previous fortnight. The estimated net liquidity surplus during the weeks ended August 08, 2019 and August 16, 2019 was Rs 1.4 lakh crore and between Rs 1.17 lakh crore and Rs 1.33 lakh crore, respectively, according to the CARE. The net liquidity surplus in the banking system has been over Rs 1 lakh crore since July 01, 2019, CARE said.

In the absence of adequate demand from companies, banks have been stepping up loans to individuals. In other words, retail credit has been growing faster but that too could slow, analysts believe. “Unsecured retail loans have contributed almost 25% in the incremental loan growth in the past three-four years for HDFC Bank but with the slowing consumption and high base impact, unsecured credit growth, especially personal loans, has come down to 25% y-o-y growth. The outlook for the corporate credit growth overall is also not very good,” according to a Nomura report.

Punjab National Bank’s loan book in the June quarter dropped 8% sequentially and remained flat as compared to the previous year quarter. The management said it will continue to focus on recoveries and conservation of capital.