Rate hike may impact flow of bank credit
05 May 2011
An across-the-board hike in lending rates announced by banking companies in India will have a negative impact on overall credit flows, especially to the two growth verticals such as housing and automobiles.
Banks are expected to pass on the increase in rates to almost all customers, including corporates. This is expected to retard the high growth rate of credit flows achieved last financial year.
Credit offtake from banks grew by over 22 per cent for the one year period ended 22 April 2011, to over Rs40,39,192.73 crore, despite a general firming up of interest rates.
Deposits with banks grew to over Rs54,70,275.98 crore as of 22 April 2011 from Rs4656704.83 crore as on 23 April 2010, RBI data showed. This is a rise of about 17.47 per cent on an annual basis.
Credit offtake during the period stood at Rs40,39,192.73 crore against Rs33.10 lakh crore in the same period of previous year, according to RBI data.
For the fiscal ended 31 March 2011, bank credit had increased by 21.5 per cent, while deposits grew by 15.5 per cent. RBI had estimated credit growth of 20 per cent for the fiscal, while it pegged deposit growth at 17 per cent.
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