At first glance, the latest data on loan growth may seem dispiriting.
Year-on-year (y-o-y) growth in bank loans was at 17.3% on 27 March, the latest date for which the Reserve Bank of India has provided data.
Growth on a y-o-y basis was higher at the end of February (18.3%) and the end of January (19.3%). But the y-o-y numbers hide more recent trends.
Take, for instance, the growth in non-food credit in the month of March, which was Rs1,04,141 crore. This was only slightly lower than the March 2008 figure of Rs1,07,065 crore.
Also See Loan Growth Picks Up (Graphic)
Another way of putting it is that non-food credit growth in March 2009 was 97.3% of the growth in March 2008.
Non-food credit growth in the fortnight to 27 March was Rs89,190 crore, well above the increase of Rs74,997 crore in the same fortnight a year ago.
In February, non-food credit growth was only 69.8% of the growth in February last year.
And in January non-food credit growth was negative and far lower than the figure for January last year.
The accompanying table shows how the growth in non-food credit has accelerated. March is always a month when growth in deposits as well as credit grow sharply as banks try to meet their annual targets.
The acid test will come in the next few months, when the usual trend is for credit to decline.
Nevertheless, the March data do show that credit growth has improved considerably from the December quarter. This is another sign that the economy has improved.
Interestingly, as credit growth picked up, banks have parked less and less of their funds in government and other approved securities.
As on 27 March, bank investments in these securities were lower by Rs21,943 crore. It’s no wonder that yields on government securities are rising.
Graphics by Sandeep Bhatnagar / Mint
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