The Hindu Business Line : Bank credit rises by Rs 49,610 cr

The rise was led by a strong growth in non-food credit, which zoomed by Rs 50,715 crore to Rs 11,01,685 crore, which was offset, however, by a decline in food credit. Food-credit dwindled by Rs 1,105 crore to touch Rs 40,016 crore.

While analysts ascribe the sudden surge in bank credit to the usual `year-end window dressing phenomenon', where banks aggressively push up advances to meet their year-end targets, bankers attribute the growth in credit it to genuine broad-based demand for funds from across sectors.

The steady hardening in bond yields over the past few months has resulted in a sharp decline in banks' investments in government securities, as a result of which more money is being deployed in the form of credit, according to bankers.

"For the same reason corporates are not accessing the bond market. Due to this, commercial papers are getting converted into working capital loans, which has also added to the growth in bank credit," said a banker.

Gross bank credit for 2004-05 increased to Rs 2,66,849 from Rs 1,31,360 crore last year.

Meanwhile, according to the weekly statistical supplement of RBI, loans and advances to the state governments increased by Rs 1,108 crore for the week ended April 8.

Total accommodation provided by scheduled commercial banks to the commercial sector in the form of bank credit and investments in shares, debentures, bonds and commercial papers increased by Rs 2,50,767 to touch Rs 11,44,881 crore for the week ended March 18.

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