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| Demand for short-term funds pushes up credit |
| BS Reporter / Mumbai Jul 16, 2009, 00:01 IST |
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Aided by increase in demand for short-term funds, bank credit went up by Rs 28,531 crore during the fortnight ended July 3, 2009.
According to the latest data compiled by the Reserve Bank of India (RBI), bank credit stood at Rs 27,98,747 crore on July 3, 2009 as against Rs 24,05,598 crore during the same period last year.
On a year-on-year basis, bank credit grew by 16.34 per cent in the fortnight ended July 3. During the same period last year, bank advances went up by Rs 16,132 crore.
“There was demand for short-term credit as the quarter was drawing to an end. Many companies may have availed short-term credit expecting the rates to come down. Investment related demand such as project finance has not picked up in the real sense,” said a senior executive at a public sector bank.
During the previous fortnight ended July 19, 2009, bank credit had grown by Rs 13,006 crore. Moreover, advances increased by Rs 31,000 crore in June.
Growth in the credit off-take was driven mainly by the non-food credit while the food credit declined by Rs 2,987 crore in the fortnight.
However, some bankers said that credit demand picked up with the government’s focus on spending and rural and infrastructure developments.
During the period, bank deposits grew by Rs 62,558.63 crore. While the demand deposit grew by Rs 20,950 crore to Rs 5,11,574 crore, time deposit or the deposit with the tenure of over a year increased by Rs 41,608 crore to Rs 35,17,132 crore. On a year-on-year basis, deposit grew by 21.93 per cent in the fortnight ended July 3, 2009.
Bank deposit rates have come down by 50-75 basis points in this financial year. Huge inflow in deposits has shot up banks’ investment in the available instruments. Banks have been parking above Rs 1,20,000 crore in the reverse repo window while the RBI is helping them with at least two-three auctions of government papers every week.
As a result of high deposit mobilisation, banks’ investments in securities went up by Rs 42,415 crore during the 14-day period.
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