Why is it in the news ?
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According to the latest data released by RBI, loan growth of commercial banks is at a five-year high on the back of strong demand.
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It has been seen as an indication of a pick-up in private investment.
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The last time non-food credit grew faster was in December 2013, when it clocked 14.9 per cent during the fortnight ended December 13.
More in the news
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According to the data, year-on-year credit growth was 14.6% in October, the highest in five years.
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Outstanding loans to companies and individuals stood at Rs 89.79 lakh crore on October end this year, a tad higher than Rs 78.08 lakh crore a year ago.
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The credit growth is broad-based. There is loan demand from large corporates, for road projects, and also non-banking finance companies.
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Credit to major sectors like infrastructure, textiles, chemical and chemical products and engineering has accelerated.
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Retail credit is also growing at a healthy pace, particularly housing loans.
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Bankers now sound increasingly optimistic about the growth trends in credit offtake.
Interest rates
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The uptick in credit growth comes amid rising interest rates.
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RBI has been increasing rates though there was a paused in the previous policy meeting in October, after two consecutive hikes.
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The next review of the monetary policy is due in December.
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Banks have also been increasing their lending rate since March.
Bank Credit
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Bank credit is the aggregate amount of credit available to a person or business from a banking institution.
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It is the total amount of funds financial institutions provide to an individual or business.
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A business or individual’s bank credit depends on the borrower’s ability to repay and the total amount of credit available in the banking institution.
Source
The Hindu.