Non-food credit grows fastest in over a year

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Lenders are trying to cash in on the festive season, drawing retail borrowers with lower interest rates.

The rate of growth in non-food credit rose to 6.68% year-on-year (y-o-y) for the fortnight ended August 27 from 6.61% in the previous fortnight. This is the fastest growth in bank lending in 16 months.

However, growth continues to remain below pre-Covid levels. The recent pick-up is aided partly by the effect of a low base and partly by the onset of the festive season in August, when credit growth typically picks up. As on August 27, outstanding non-food credit stood at `108.29 lakh crore, showed data released by the Reserve Bank of India (RBI).

Lenders are trying to cash in on the festive season, drawing retail borrowers with lower interest rates. On Thursday, Kotak Mahindra Bank said that it would price home loans at 6.5% per annum for a section of borrowers for the next two months.

Ambuj Chandna, president — consumer assets, Kotak Mahindra Bank, said the lender wanted to offer a good deal to its customers during the festive season and an environment of abundant liquidity helps do that.

“We do see a credit lift across segments, including unsecured loans, credit cards. I think the big thing is that festival time is when people buy new homes and there is a genuine demand out there. We believe there is an opportunity to grow,” Chandna said.

Non-bank lenders say they have also seen an improvement in credit offtake in the last few weeks. Ramesh Iyer, vice-chairman & MD, Mahindra & Mahindra Financial Services, told FE that footfalls at auto dealerships are quite high. “In fact, the problem really is the availability of vehicles rather than the demand for vehicles because of the supply chain problems of some OEMs (original equipment manufacturers). I was always hopeful that the post-monsoon festival season will be a buoyant one, and I continue to hold that view,” he said.

Meanwhile, deposit growth slowed to 8.64% y-o-y from 10.58% in the previous fortnight. The value of bank deposits stood at `155.17 lakh crore as on August 27. Quarterly data released by RBI showed that deposit growth grew slower during the quarter ended June 2021 as the second Covid wave hit households across the country.

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