Unfortunately, if the latest data on credit growth from the Reserve Bank of India is any indication, bank lending has been, instead of picking up, slowing even more.

For the period between 9 October and 6 November, outstanding non-food credit by banks went up by Rs2,005 crore. Between 11 September to 9 October, they were up by Rs69,410 crore, between 14 August and 11 September, the increase was Rs25,085 crore and between 17 July and 14 August, they rose by Rs23,686 crore.

Graphics: Sandeep Bhatnagar / Mint

It’s best not to compare loan growth in the current year with that during the pervious year because conditions were very different then; oil prices were high and the primary market was non-existent. But just for the record, between 10 October and 7 November 2008, non-food credit increased by Rs76,612 crore.

What’s going on? One obvious fact is that companies are raising a lot of money via the primary market, by qualified institutional placements and other private placements. But perhaps the clue to the dismal non-food credit offtake in the past month is linked to the good credit growth during the previous month. Perhaps firms were stocking up on inventories before the festive season, so they didn’t need to access bank credit during the next month.

This argument ties in with the strong growth in industrial production in September. If credit growth is any guide, then the Index of Industrial Production for October, shorn of year-on-year base effect, should be more muted.

Also, here’s how food credit offtake has been affected by drought. Between 31 July and 6 November, outstanding food credit contracted by Rs6,778 crore, compared with an expansion of Rs7,226 crore in the year-ago period.

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