MUMBAI, July 18: The sluggish offtake of loans is set to trouble the banking sector again. Non-food credit offtake in the first quarter of the current fiscal (March 27-July 3) has registered a sharp fall of Rs 7,282 crore (-2.3 per cent) against a Rs 1,113 crore negative credit growth (0.4 per cent) in the corresponding period of the previous financial year, according to the Reserve Bank of India (RBI).In contrast, aggregate deposits of the banking sector in the first quarter jumped by Rs 18,198 crore against Rs 15,293 crore in the first quarter of 1997-98. In percentage term, however, the growth is identical three per cent.
While food credit has shown a growth of Rs 5,198 crore during the quarter, up from Rs 1,301 crore posted in the corresponding period of the previous year, bank credit as a whole has been down by Rs 3,083 crore (-0.6 per cent) in the first quarter. In the corresponding period in the last fiscal, bank credit was up by Rs 188 crore (0.1 per cent). Even after considering banking sector'sinvestments in shares, debentures, bonds and commercial paper credit was down by Rs 4,408 crores as on July 3, 1998 compared to a growth -- albeit marginal -- of Rs 250 crore in the previous fiscal.
Though credit offtake typically does decline in the first quarter on account of the slack season, the decline this year has been steeper than usual, ICICI Securities & Finance (I-Sec) said in its latest debt markets update.
I-sec said the shift from extending commercial credit through the traditional cash credit route to investments in corporate paper, which began in 1997-98, has continued.
The centre's resort to ways and means advances has gone up by a whopping Rs 3,919 crore during the week ended July 4, 1998. This, despite the auction of three papers on July 1, 1998, to raise Rs 5,500 crore. The government's recourse to ways and means advances has breached the 75 per cent trigger limit and now stands at Rs 10,996 crore.
The limit for the WMA for the first half of the current fiscal is pagged at Rs11,000 crore and the government has to float a new security as soon as it touched 75 per cent of the limit.
During the previous week ended June 27, 1998, the resort to ways and means advances stood at just Rs 124 crore. At the July 1 auction, RBI set the cut-off yield of the three, five and 12-year papers at 11.55 per cent, 11.75 per cent and 12.25 per cent, sending clear signals of rising interest rates.
Analysts said that the government has been on a spending spree. "Despite a Rs 5,500 crore auction the WMA has gone up to Rs 10,996 crore," a debt analyst in a leading brokerage said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
