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Bank credit numbers belie `feel good' factor

Poornima Mohandas

Mumbai , Sept. 20

THOUGH there is a feel good factor in industry and every industrialist and banker is talking of an economic recovery, bank credit numbers do not confirm the good tidings.

Cumulative bank credit (food and non-food) has gone up for two consecutive weeks albeit by a few thousand crores. For the week ended September 5, total outstanding bank credit increased by a mere Rs 5,660 crore to touch Rs 7,32,904 crore, according to the latest figures from the RBI.

However, the pace of growth in bank credit figures in the previous year was significantly higher at 18 times that of the current year. The variation in bank credit for the first five months of 2002-03 was at Rs 68,271 crore, while that this year was a mere Rs 3,689 crore. The variation in non-food credit, reflective of industrial and retail climes, was at Rs 66,071 crore in 2002-03 as against Rs 11,562 crore in the current year. This means the rate of pick up in credit in a `dull year' as 2002-03 was substantially more than seen this year when a `feel good' factor is said to be permeating the economy.

Most of the rise in bank credit seen in this fiscal at an average rate of a few thousand crores has been attributed to the ongoing retail boom, agree bankers.

If one were to look at the calendar year figures too, the increase in bank credit was substantially higher in 2002 at Rs 1,30,206 crore as against Rs 74,911 crore this year. The increase in the non-food credit had also been higher at Rs 1,24,098 crore in 2002, about 1.4 times than in 2003 at Rs 89,482 crore. This fortnight's increase of Rs 5,660 crore is seen to be more by way of corporates drawing on their cash credit facility to the fullest limit to meet advance tax requirements for which the due date is September 15 coupled with housing loans.

Said Mr R. Ashokkumar, President, Credit, UTI Bank, "Although there are positive signs in the country with the burgeoning reserves, good monsoons, the growing housing loan market and ongoing NHAI-led road projects, there are no large investments in machinery manufacturing and unless that happens across large number of industries there will be no real recovery.''

Bankers expect some pick up from agricultural credit in October-November 2003.

"With the sowing of the rabi crop in October-November there is typically a demand from farmers for crop loans, loans for purchase of tractors, fertilisers and farm implements. Coupled with this is the festive season, and we should see a pick up in rural demand for credit,'' said the general manager, credit, of a large state-run bank.

The total accommodation provided by scheduled commercial banks to commercial sector in the form of bank credit and investments in shares/debentures/bonds/commercial paper, etc has increased only marginally to Rs 9,137 crore for the period March 21-September 5, 2003 at 1/7th the rate of investment in the previous year from March 22-Septmber 6, 2003 which was at Rs 72,055 crore.

This lower disbursement showcases a lack of opportunities to make investments, said the treasury head of a nationalised bank.

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