Is there credit growth at all?

By: Arjun Parthasarathy

A close look at the latest figures put out by the Reserve Bank of India (RBI) shows that credit growth was largely due to borrowing by the oil marketing companies (OMCs). If this borrowing comes down, credit growth can even become negative.

The OMCs have been borrowing heavily due to the losses suffered from selling fuel at prices lower than refinery-gate prices. OMC borrowings had crossed Rs 115,000 crore as of June 2011, almost doubling over the last few months, due to the sharp rise in crude oil prices.

Brent crude prices had gone up by 25% over the last six months and the government, until June 24, had not raised fuel prices to pass on the oil price rise. The OMCs suffered from the government