Here are some numbers that may cheer the banks. There are, finally, some signs of robust credit offtake. Data put out by the Reserve Bank of India show that non-food credit offtake has increased by as much as Rs 64,000 crore (Rs 640 billion) in the last four months (fortnight ended September 5, 2003, to the fortnight ended January 9, 2004).
In fact, the latest fortnight showed the maximum rise in credit growth at Rs 11,233 crore (Rs 112.33 billion).
However, it is still too early to raise a toast. The non-food credit offtake till January 9 is still lagging behind the growth recorded in the same period of 2002-03. In the first nine months of the current financial year, non-food credit growth was Rs 75,717 crore (Rs 757.17 billion), whereas in the corresponding period last year, it was Rs 109,660 crore (Rs 1096.6 billion). In other words, the incremental credit kitty is still about Rs 34,000 crore (Rs 340 billion) less than last year.
Bankers said the economy was chugging along at a smooth pace and a strong credit appetite was emerging from the corporate sector. Steel, textiles, cement, pharmaceuticals, automobile ancillary and road projects are showing a healthier credit appetite.
However, there is no stopping banks from chasing zero-risk government securities.
Bank investments in gilts this financial year is up to Rs 107,392 crore (Rs 1,073.92 billion) from Rs 88,309 crore (Rs 883.09 billion) in the corresponding period last year.
Riding high on the demand pick up, several companies in various sectors are drawing blueprints for expansion.
However, very few are tapping banks for funds. They are either drawing on internal accruals or planning to raise money from the market.
The latest finance ministry decision to relax the norms for external commercial borrowing and allowing companies to borrow overseas at a cost of up to 350 basis points over Libor (London interbank offered rate) will put further pressure on banks as mid-rung companies, too, have the option to tap the overseas market. "This can also force the banks to bring down their lending rates further," said the chief financial officer of a manufacturing company.
Banks are also pinning hopes on the government proposals for Rs 1 lakh crore core sector and farm sector funds. "If the government is serious, a substantial chunk of bank credit will be channelled into these sectors. However, no bank is willing to dole out money at a concession," said a senior banker.
