Non-food bank credit grows at 15.6%

The commercial sector’s total credit growth from banks exhibited a robust year-on-year increase of 15.6 percent, reaching Rs 97.32 lakh crore in the fortnight concluding on November 9, 2018. This marked the highest growth since the demonetization of Rs 500 and Rs 1000 notes in November 2016, according to data from the Reserve Bank of India.

Comparatively, the adjusted non-food bank credit in the same period last year stood at Rs 84.22 lakh crore. The adjusted non-food bank credit includes non-food bank credit and the total non-statutory liquidity ratio (SLR) investments of banks in commercial papers, shares, and bonds/debentures.

It is noteworthy that the period from November 2016 to March 2017 witnessed the lowest bank credit, following the Indian government’s decision to demonetize high-value currency notes on November 8, 2016.

In the reporting fortnight, non-food credit grew by 15.12 percent, reaching Rs 90.51 lakh crore, while total non-SLR investments increased by 22.26 percent to Rs 6.81 lakh crore, compared to Rs 5.57 lakh crore in the corresponding period last year. A senior banker from a public sector bank observed, “The growth in bank credit flow indicates that corporates are currently able to secure ample credit from banking sources without encountering constraints or bottlenecks.”

This heightened credit growth occurs even as 11 banks operate under the Reserve Bank of India’s prompt corrective action (PCA) framework, restricting them from engaging in fresh lending. Among the 21 state-owned banks, the 11 under PCA include Allahabad Bank, United Bank of India, Corporation Bank, IDBI Bank, UCO Bank, Bank of India, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce, Dena Bank, and Bank of Maharashtra.

Despite this positive credit scenario, the banking system’s liquidity remained under pressure and continued to face a deficit in the week of November 19-23, 2018. This marked the seventh consecutive week of a liquidity deficit, with the situation persisting since September 11, 2018. The liquidity deficit for the week rose to a one-month high, with an average net deficit of Rs 1.11 lakh crore—Rs. 21,000 crore more than the previous week. The total repo borrowings reached a one-month high of Rs 1.47 lakh crore on November 22.