The Hindu Business Line : Non-food credit surges in November

Mumbai, Dec. 15 Banks saw a huge increase in commercial credit in the month of November, after a slowdown in October that had sparked fears of a downturn in industrial activity. Bank officials cite increase in seasonal activities post-monsoon and the busy season effect as reasons for this increase.

According to the figures released by the Reserve Bank of India, the increase in November was Rs 62,083 crore. As against this, the increase in October was only Rs 1,622 crore.

This trend of an increase in credit in the second half is noticed every year, said bankers. In the first half of this fiscal, the credit offtake for the banking industry was less than 21 per cent said a senior official from one of the larger PSU banks. Bankers expect it to remain the same or increase marginally in the second half. But it is not likely to see the growth of 25-30 per cent that was seen last year.

Monsoon effect

“Credit offtake usually picks up in November-December compared to the early months. The first half of the fiscal is slack due to the monsoon,” said an official in charge of credit, of a public sector bank. Interestingly the credit offtake in November 06, at Rs 26,116 crore, is roughly only forty per cent of the latest figure.

Mr Sitaramam Komaragiri, Deputy Managing Director and Group Executive, National Banking, State Bank of India, said that the bank saw huge growth in the retail and mid-corporate segment. “We have not yet analysed our data. But at first glance, figures for November and December show huge growth in retail and mid-corporate sectors.”

Lag effect

While the restrictions imposed on External Commercial Borrowings may force Indian corporates to look at rupee loans, the impact will be seen with a lag effect, said bank officials. “As those corporates who have already taken approval will be permitted to borrow, the effect of the limits imposed on ECBs will be seen with a lag effect,” said a bank official.

Another senior official said that oil companies could be resorting to huge remittances due to the high oil prices. “As oil prices are very high, oil companies could be drawing huge amounts to make payments.”

Other industries that could see demand picking up in the second half include cotton and sugar, as these are seasonal activities and start post-monsoon. The loans growth could also include lending for the rabi crop, which starts around November, the official added.

Related Stories:
Low credit offtake forces banks to focus on investments
Non-food bank credit decreases

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