Home > Telecom > Will 3G give the required push to credit growth?

Will 3G give the required push to credit growth?

As mentioned in my earlier article (3G auction in India: Payment and Other Updates), an overwhelming response to the 3G auctions resulted in a total revenue of Rs 67,719 crore for 22 service areas in India. The deadline set for the payment of the full amount for the airwaves was May 31, 2010, which was met by the telecom companies.

Logically, credit offtake numbers for May 31 are expected to show a year-on-year rise. Money markets also exhibited a temporary blip: on May 31, 2010, excess cash with RBI dipped from an average of Rs 40,000 crore to merely Rs 540 crore, resulting in firming up of bond yields. While total credit outstanding fell 0.3% from March 23 to Rs 32.3 lakh crore on May 21, YoY credit growth for May 21 was quite robust at 18%. This is likely to get a further boost when the May-end numbers roll in, since it’s expected to reflect the loans taken by telcos to pay for the 3G spectrum fee.

Indian banks have reported a decline in outstanding loans in the first three weeks of May compared to the previous month. It is to be seen whether the spectrum-related loan growth will provide a sustainable push to credit growth or the trend of month-on-month marginal decline will continue for some more time.

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Categories: Telecom
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