Non-food credit growth in the fortnight ended November 13 stood at 9.98% compared to the same period last year despite it being the busy season. The outstanding non-food credit in the banking system as on November 13 stood at Rs 67.29 lakh crore. While bankers expected a pick-up in loan growth in the second half of the year, the momentum remains slow. As such, lenders are sitting on surplus funds with not too many opportunities to deploy the money.
However, the difference between the credit growth and deposit growth rates has started to narrow even as non-food credit growth is beginning to see some pick-up. As on November 13, deposit growth stood at 10.99% compared to the same period last year with the outstanding deposits in the system at Rs91.02 lakh crore.
As on October 30, deposit growth stood at 11.14% compared to the corresponding period last year with the outstanding deposits in the system at Rs91.40 lakh crore.
The sluggish non-food credit growth this financial year has been partly due to some shift to the corporate bond market.
Although banks have been cutting their base rates throughout 2015 after multiple repo rate reductions this calendar year totalling 125 basis points, interest rates in the bond market have been more attractive to borrowers.
As of now, a AAA-rated public sector unit can issue ten-year bonds at a yield close to 8.25%. However, the lowest base rate in the banking system currently stands at 9.30%, marking a difference of at least 105 basis points. This had given a boost to the corporate bond market. Data from the Securities and Exchange Board of India shows that between April and October, firms borrowed R2.86 lakh crore through the corporate bond market.
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