Hunger for credit down
Despite widespread talk of economic recovery, much of the revival in growth seems to be on old steam.
Despite widespread talk of economic recovery, much of the revival in growth seems to be on old steam.
Bankers say they have not witnessed significant offtake of loans in the current fiscal year mainly on account of delays in infrastructure projects and less demand from oil marketing companies.
Credit offtake, in fact, dipped by more than 30 per cent in the April to August period of the current fiscal compared with the corresponding period of the previous year. New projects are not taking off as fast as expected.
For example, as many as 37 infrastructure projects are running behind schedule in Maharashtra while in Assam about 36 projects have got delayed, while in Andhra Pradesh, the number is 31.
Oil marketers like Indian Oil Corp had borrowed heavily in 2008-09 to meet their capital expenditure last year as global crude prices surged to more than $140 a barrel areound June 2008, inflating their import bills.
“This year, the demand from oil companies has dropped while last year, they borrowed heavily to keep up with the high global crude prices,” said Allen C.A. Pereira, chairman and managing director, Bank of Maharashtra.
A senior private sector bank executive, who did not want to be identified, said it is key that the slowdown began in the latter part of the last fiscal year.
“The slowdown hit the country only during the third quarter, there was very high appetite for credit in the first two quarters of the previous fiscal,” the executive said, explaining the year-on-year credit slump.
Credit rater Crisil’s principal economist D.K.Joshi said the current credit pattern was in line with the downturn.
“Though the worst is behind us, it will take time for credit growth to pick up, but once it does, the Reserve Bank is likely to increase policy rates to balance inflation,” he said.
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