Deposit growth lags while credit grows in line with RBI projection

Bank loans grew 16.04 per cent in line with Reserve Bank of India (RBI)’s projection for credit growth this year while deposits continued to lag behind at 13.08 per cent.

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

Deposit growth has consistently been falling this financial year and is yet to touch the 15 per cent mark as projected by RBI for this financial year.

On the other hand, credit growth has been more or less on track though RBI revised it from 17 per cent to 16 per cent.

Following the cental bank’s reduction in cash reserve ratio and repo rate by 25 bps in January end, banks have started reducing their lending rate. But, most banks have refrained from reducing deposit rate due to slow pace of growth.

Of late, State Bank of India, unable to deploy excess liquidity, is also facing a flight of deposits to other instruments like mutual funds.

Depositors are preferring investing money in real estate and gold which are giving better returns.