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RETAIL SECTOR BEEFS UP CREDIT DEMAND


Banks are seeing a strong pick-up in credit demand in recent fortnights, driven largely by the non-manufacturing sector, particularly retail.

In the latest three fortnights between August end and the first week of October, loans have risen by 103,736 crore. Outstanding bank loans amounted to 4,148,597.55 crore as on October 7, up 5,5442.58 crore over the previous fortnight's levels. This translates into an annual or year-on-year growth of 19.6%, higher than the central bank's comfort level of 19% projected for the year. However, growth in the year-ago period was marginally higher at 20.1%.

On an incremental basis, loan growth works out to 5.2% compared with 6.9% in the year-ago period.

Banks are not seeing any demand from corporates for any greenfield projects. Much of the demand is for working capital loans and retail. The RBI data also show a strong pick-up in loans to NBFCs this year.

"Corporates continuing to fund ongoing capex plans, however, refrain from making fresh investment," said HDFC Bank executive director Sukthankar.

"There is a rethink among corporates on new projects because of which we are not seeing a demand for project loans. Corporates are only drawing funds for their existing projects and for their working capital requirements," said a senior executive with a public sector bank, requesting anonymity.

A recent report by Care Ratings on the investment climate in the country notes: "Bank credit has grown at a much slower rate this year in terms of both conventional credit as well as credit-like instruments. This may be attributed to lower demand for credit due to the lower growth in industry as well as higher cost of credit which was a deterrent." But banks are seeing a stronger growth in deposits. It has recorded a 17.5% growth in deposits until October 7 this year. Flush with funds, banks have invested more in G-secs than lent as loans so far this year.

SOURCE: http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/-retail-sector-beefs-up-credit-demand/articleshow/10421865.cms

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