Bank loan growth is slowing down. The figure for the fiscal so far is Rs 9,132 crore against Rs 66,950 crore during the corresponding previous period, according to the Reserve Bank of India’s weekly statistical supplement, according to a Hindu Business Line report. Top bankers confirmed the trends showing sluggish borrowing.

HDFC Bank’s Country Head for Retail Assets, Mr Pralay Mondal, said: “Yes, there is a slowdown in retail credit offtake. It is far lower than what it was last year.” Are these incipient signs of an economic slowdown? Public sector bankers as well as corporate finance heads preferred to be cautious and not read too much into these numbers, just yet.

Canara Bank’s Chairman and Managing Director, Mr M.B.N. Rao, said: “The peak season has not yet begun. So, it is too early to say there is a slowdown. Besides, we have all taken to portfolio re-balancing for increasing availability to the productive sectors of the economy.” Mr V.M. Mohan, Joint President (Corporate Finance), India Cements, agreed with that view.

“We have to wait and see for another quarter at least before we can say that with certainty. There is a still a seasonal element in many industries. For instance, in the cement industry you can’t predict the demand during the monsoons. Usually, if it is dull at that time there is a pick-up in the following quarter. But we do sense that bankers are not gung-ho about loan growth as they once were.”

Mr A.S. Ravi, Executive Vice-President (Finance), Lucas-TVS, said: “Interest rates have tightened in the Indian money market. It has gone up by about two percentage points over the past year, although it has since come down slightly. We do not yet see any slowdown. All of us are on a growth path. The rate of growth may not be as high as it was about 18 months ago, when the economy was still in the recovery mode.”

Despite such reassurances, corporate borrowing patterns are worrying. Till the middle of August, when the RBI cracked down on external commercial borrowings (ECBs), top corporates had been in favour of ECBs in place of domestic credit. Pricing was one critical factor driving the push to ECBs. With effective costs at just nine per cent, ECBs were seen as a better source of funding.

The ECB window is now practically closed due to a number of restrictions. But domestic rates are still on the high side. Mr A. Subba Rao, CFO of the GMR Group, said: “For project finance we would like to see lower rates. Till such time rates come down we will draw on our own resources.” That the drawdown has started was apparent from the fall in demand deposits by over Rs 49,000 crore from the beginning of this year. A top banker said that corporates are redeeming bulk deposits they had placed with the banks in March.