Credit growth has shown signs of picking up ahead of the busy season. The increase in non-food credit was Rs 15,621 crore in the fortnight ended August 3.
Logs year’s fastest rise in fortnight ended Aug 3
MUMBAI: Credit growth has shown signs of picking up ahead of the busy season. The increase in non-food credit was Rs 15,621 crore in the fortnight ended August 3, as against a rise of Rs 2,861 crore in the fortnight ended July 20, the Reserve Bank of India’s weekly statistical supplement showed. It is the highest fortnightly credit growth number so far this year.
Aggregate credit stood at Rs 18.88 lakh crore as on August 3, 2007. Year-on-year credit growth was still lower (at 23.4%) in 2007 (over 2006), compared with a 31.1% growth in 2006 (over 2005).
Economists say the spike in the fortnight credit could be the start of the kick in of the busy festive season for banks.
“The figure (fortnightly increase) may seem to be high because of the low credit in the initial months (slack season for bank credit) of the year. However, the spike could be the start of a strong growth in credit starting with the festive season in September,” said DK Joshi, principal economist, Crisil.
Traditionally credit starts picking up with Ganesh Chaturthi in September followed by Navratri, Diwali and Christmas.
Economists expect credit to overtake deposit growth in the last two quarters of the financial year, which are traditionally the busiest for banks in India.
The increase in deposits has been 24.3% (2007 over 2006) now versus 21.1% (2006 over 2005).
Aggregate deposits stood at Rs 27.68 lakh crore as on August 3, 2007. In the fortnight, they rose by Rs 38,940 crore as against a Rs 16,013 crore growth in the fortnight ended July 20.
Deposit growth has outpaced credit growth for more than a month now as banks added deposits at a faster pace and loans have become expensive because of monetary tightening measures by the Reserve Bank of India.
Meanwhile, the country’s foreign exchange reserves dipped for the second consecutive week as foreign funds continued to pull out of Indian stock markets due to increased risk aversion following the sub-prime crisis in the US.
Foreign exchange reserves dipped by $2.55 billion to $226.44 billion in the week ended August 17 following a $346 million fall in the week ended August 10.
“The latest dip is mainly due to portfolio outflows. Till Thursday, FIIs have taken out $2.5 billion in one month from the Indian markets,” said Shubhada Rao, chief economist, Yes Bank.
Analysts say some part of the dip in reserves could be also because of the appreciation/depreciation of non-dollar currencies in the reserves.
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