Banks Pushes for Short Term Credit :)

Banks have started pushing short-term credit to shore-up loan books before the end of the lean season.

Bank’s move is attributed to abundant liquidity.

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According to highly placed bank officials, credit off take continue to be lacklustre.

Credit growth this year was hardly a third of the level for the corresponding period of the previous year.

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This financial year, non-food credit was only Rs 29,133 crore as against Rs 98,840 crore during the corresponding year-ago period.

This translated into an incremental credit-deposit ratio of just 12 per cent as against 53 per cent for the same period of the last financial year.

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Meanwhile, the majority of corporate loan off-take (especially by large corporates) was in the form of short-term loans.

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Most of the loans are for short durations like of the 30 days.

These loans are refinanced with commercial paper (CP) issues.

Further, the loans were priced low, as between 7 and 8 per cent.

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Such short-terms advances were then repaid when corporate made their CP placements.

Last week alone, public sector corporates, including SAIL, had raised at least Rs 2,000 crore through six-month CP issues priced as low as 5 per cent.

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Bankers feel short-term credit push would help them beef-up loan books for the second quarter of the financial year.

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