Bank credit zooms to record...meets RBI target

Record amount of window dressing by banks helped them set a record in terms of fortnightly credit growth, data released by the Reserve Bank of India (RBI) showed on Wednesday. Not only that, banks also managed to surpass the central bank's fiscal year target of 16% year-on-year growth in non-food loans.

In the fortnight ended March 26, bank credit surged by Rs1,15,548 crore, according to the data released by the RBI yesterday. This is the fifth consecutive fortnight in which bank credit has expanded. As on March 26, banks' outstanding credit stood at Rs 32,40,398.52 crore.

Bank credit grew by 16.74% or Rs 4,64,849 crore in FY10, exceeding RBI's projected non-food credit growth target of 16% for the fiscal.

Credit growth in the banking system, which was at least 27.6% in FY07, declined to 21.6% in FY08 and to 17.3% in FY09, before tumbling to a 12-year low of 9.49% in October 2009. Since then, an easy money policy from the RBI, coupled with stimulus packages from the Government, has gradually pushed up credit growth.

Twice during FY10, the RBI revised down its credit growth projection. The central bank lowered it from 20% to 18% in the first half and then to 16% in the second half.

Meanwhile, deposits surged by Rs83,630.57 crore to Rs 44,86,573.66 crore in the fortnight ended March 26. On a year-on-year basis, deposits grew by 17.1% - barely meeting the RBI target of 17% for FY10.

Investments by banks in government securities and other approved securities dipped by Rs 4,253.29 crore to Rs 13,82,683.58 crore.