Non-food credit for scheduled banks continued to grow at a higher rate of 17.90% year-on-year to R55,67,645 crore from R47,22,212 crore for the fortnight ended October 4, according the latest RBI data.
Corporates have moved towards bank financing for their working capital needs due to a liquidity crunch which led to market borrowings via commercial paper (CPs) becoming more expensive, bankers said.
RBI announced a number of measures to stem slide in rupee since July 15, which has led to drying up of liquidity and a spike in money market rates. However, since then RBI had cut the marginal standing facility rate twice to 9%. Bankers say with easing liquidity, companies may go back to CP market to raise funds.
“A number of companies used to go to CP and CD markets for their working capital needs, but that shifted to the banks as RBI imposed liquidity tightening measures. There is also a huge push by banks to lend to retail, SME and agriculture segments which has been pushing credit growth,” said Arun Kaul, CMD of UCO Bank.
Bankers also said some companies were raising short-term foreign currency borrowings, but as dollar loans became more expensive due to a depreciation in the local currency, many of them have shifted back to rupee borrowing from domestic banks.
Meanwhile, deposit growth increased to 14.82%. Deposits grew to R73,61,690 crore from R64,11,699 crore y-o-y. While time deposits grew 15.15% and demand deposits grew 11.63%. Time deposits increased to R66,80,727 crore from R58,01,668 crore y-o-y and demand deposits grew to R6,80,956 crore from R6,10,031 crore from the same period last year.
“RBI’s measures to attract dollar inflows through FCNR windows will further push deposit growth in the coming fortnights,” said Kaul of UCO Bank
Time deposits are those which are locked in with the bank for a fixed tenure and banks pay a higher interest rate on them than demand deposits, which can be withdrawn anytime.