Banks have registered a credit growth of 23.2 per cent for the year till February 25, while deposits grew by 16.4 per cent.
Bank credit grew at a slower pace during the fortnight ended February 25, as compared to deposits. Loans expanded by Rs 25,875 crore during the fortnight, while the deposit base expanded by Rs 41,607 crore. Banks had been raising deposit rates aggressively in recent times and this seems to be working.
According to the latest Reserve Bank of India data, advances of commercial banks were Rs 38,10,445 crore as of February 25, while deposits were at Rs 50,83,852 crore.
Following Reserve Bank of India’s discomfort with the high incremental credit deposit ratio, banks have been focusing more on deposit mobilisation. RBI’s recent reminder to banks on ensuring end-use of funds has made the latter cautious on short-term loan disbursals. In addition, high interest rates may have also impacted loan growth, said bankers.
“Credit growth is certainly slowing, as there aren’t many takers for loans at such high rates. For the month of March, one can expect high growth on both sides, as banks resort to window-dressing of their balance sheets towards the financial year end,” said a senior official of a public sector bank.
Market participants expect the deposit rate to have nearly peaked but deposit growth may further pick up from the next quarter, as liquidity is expected to ease.
“We do not expect deposit rates to go up in the near term. Banks will wait and watch the impact of their recent rate hikes in the first quarter of financial year 2011-12. We should see deposits picking up in the next quarter, when liquidity is also expected to ease,” said Vaibhav Agarwal, vice president-research, Angel Broking.
The gap between credit and deposit growth, however, continues to be larger than the central bank’s comfort zone. RBI had projected 18 per cent growth in deposit and 20 per cent growth in credit for 2010-11.