Deposits growth continues to lag at 13.08%

Credit grows in line with RBI projection

Bank loans grew 16.04% in line with Reserve Bank of India’s (RBI) projection for credit growth this year while deposits continued to lag behind at 13.08%. RBI projection for the deposit growth this fiscal is 15%.  

According to the data released by RBI, the banks disbursed fresh loans worth Rs 8,500 crore in the fortnight ended January 15 while deposits in the banking system came down by about Rs 11,500 crore.

Deposit growth has consistently been falling this financial year and yet to touch the 15% mark as projected by RBI for this fiscal.  On the other hand credit growth has been more or less on track though RBI revised the credit growth from 17% to 16%.

Following the cental bank's reduction in cash reserve ratio and repo rate on end January, banks have started reducing their lending rate. However, most banks have refrained from reducing deposit rate due to slower pace of growth.

Off late State Bank of India which was unable to deploy excess liquidity is also facing flight of deposits to other instruments like mutual funds. Depositors are preferring investing money in real estate and gold which are giving better returns.

Most banks have refrained cutting deposit rates even they cut lending rates after RBI announced the repo and CRR cut of 25 basis points as deposit growth is a cause of concern.