Due to low credit demand, loan growth has dropped to single-digit level in the fortnight ended Oct 23, 2009. This year up to October, bank credit increased by 9.65 per cent, slowest since April 1997. According to the latest data released by the Reserve Bank of India (RBI), total loans, including food credit and non-food credit, were down by Rs 21,750 cr to Rs 28,68,566 cr as on Oct 23 as against an increase of Rs 7,637 cr in the corresponding period last year. In the previous fortnight, bank credit was up by Rs 17,160.58 cr. On a year-on-year (y-o-y) basis, non-food credit grew to 10.31 per cent as against 29 per cent in the last year. Food credit involves the loans given to Food Corporation of India for food grain procurement while non-food credit includes the loans given to farmers, individuals and businesses.
According to the RBI data, private and foreign banks are largely affected by the slack in credit demand. Loans by foreign banks were decreased by almost 11 per cent during the period. In its quarterly review of monetary policy, the RBI revised its credit growth projection downward from 20 per cent to 18 per cent.