Bank credit grows 14%; deposit growth at 13.4%

Banks disbursed new credit worth of about Rs 48,900 cr in the fortnight, while accumulated deposits of about Rs 92,200 cr were distributed in the fortnight

Bank credit increased 14.1 per cent year-on-year (y-o-y) in the fortnight ended May 31, while deposits rose 13.4 per cent.

According to data released by the Reserve Bank of India (RBI), banks disbursed credit worth about Rs 48,900 crore during the fortnight, while they accumulated deposits of about Rs 92,200 crore. For this financial year, RBI’s projections for credit and deposit growth are 15 and 14 per cent, respectively.

In absolute terms, credit and deposit growth was a tad better compared to the year-ago period. While banks disbursed loans worth Rs 21,000 crore in April-May 2012, this April-May, they disbursed about Rs 33,000 crore; they accumulated deposits worth about Rs 62,000 crore, against Rs 44,000 crore in April-May 2012.

“Since growth numbers are projected at slightly better levels than last year’s, there should be some pick-up (in loan growth) this year, both in absolute and relative terms,” said Ranjan Dhawan, executive director, Bank of Baroda.

Historically, most of the growth was recorded in the second half of a financial year; there wouldn’t be any change this year, too—the pick-up would be slow in first half, he added.

Banks have started cutting deposit rates, at least in the bulk segment. Last week, State Bank of India had reduced bulk deposit rates by 25 basis points for select tenors.

Most banks, however, haven’t reduced retail deposit rates yet, as they fear depositors might turn to other asset classes that give better returns than fixed bank deposits.