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Significant rise in credit offtake

Rajalakshmi Menon

Bankers attribute the pick-up to demand from industries such as petroleum, chemical, food processing and infrastructure.

MUMBAI, March 5

AFTER a gloomy first half, offtake of bank credit has witnessed a significant pick-up in the second half. In the five months from September 7, 2001, to February 8, 2002, non-food credit rose to Rs 37,500 crore compared to advances of Rs 6,000 crore in the first five months from April to September 2001.

Though credit offtake is normally higher in the second half, this year the difference between the first and the second half is quite significant.

According to available figures, from April to September 2001, non-food bank advances amounted to only Rs 6,000 crore as against Rs 20,000 crore in the corresponding period in the previous year.

As against this, in the second half of the current fiscal up to February 8, total advances rose to Rs 37,500 crore as against Rs 31,000 crore in the previous year.

Banks' investments in commercial papers, bonds debentures and shares of PSUs and private sector companies have also been lower at Rs 2,600 crore during March-January 2001-02 compared to Rs 9,700 crore previously.

Figures indicate that the slowdown started in the fourth quarter of 2000-01, when credit growth stood at Rs 11,200 crore compared to Rs 20,700 crore in the previous corresponding period.

According to bankers, credit to the retail segment has picked up significantly in the second half of the current year. State Bank of India has reported disbursements of around Rs 400 crore each in January and February 2002 in housing loans alone.

Bankers also attribute the pick-up in credit in during October and November to demand from industries such as petroleum, chemical, food processing and infrastructure, particularly power. However, industries such as sugar, cement and gems and jewellery continued to fare poorly.

Bankers point out to a peculiar phenomenon: While till mid-September, credit growth was around Rs 6,000 crore, within one week, credit picked up by Rs 3,500 crore.

The next fortnight it rose by Rs 11,200 crore, amounting to an increase of around Rs 15,000 crore for one month compared to Rs 6,000 crore for five months.

Said one senior banker: "At the end of every quarter, one sees a rise in credit partly on account of the quarter-end interest applications and partly on account of branch-level targets that most branches try desperately to achieve."

Bankers expect a pick-up in credit growth for the remaining two months of the fiscal, as this time of the year is generally busy.

They, however, said there was not much to cheer about as poor credit growth in the first five months could not be offset by the growth in the next five months.

Said a banker, "The credit growth in the second half could be on account of the 200 basis points cut in cash reserve ratio and the 50 basis points cut in the bank rate. These cuts should have boosted credit growth further, but that has not happened. The attacks on the World Trade Center and Parliament House have dampened investor sentiment to a large extent."

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