Deposits grow 13.9%, credit offtake by 19.3% in Q2: RBI

The aggregate deposits in banks grew by 13.9% in the July-September period, much below the government's target of 20% for the whole financial year, as interest rates fetched negative returns due to high inflation.

The growth of aggregate deposits in the corresponding quarter of last fiscal was 19.8%, the Reserve Bank said in its report on 'Quarterly Statistics on Deposits and Credit of scheduled Commercial Banks -- September 2010'.

Credit offtake of commercial banks grew by 19.3% during the July-September period, against 12.3% growth in the comparable quarter of the last fiscal.

The total deposits at the end of September stood at Rs 46,72,002 crore, while credit offtake was Rs 34,36,948 crore.

The aggregate deposit growth of banks in rural areas during the July-September period was 14.4% as against 19.8% in the year-ago period.

Meanwhile in the urban areas, the growth rate of bank deposits plunged even more steeply to 15.8% at the end of September 2010, from 20.8% in the corresponding period last year.

However, gross loan disbursal by banks grew 17.4% in rural areas during the period, as against 21.5% growth in the same period last year.

In towns and cities, the rate of growth of loan disbursal was 20.6% in September quarter, as against 18.9% in the same period previous fiscal.

The higher credit growth implies an increased business activity in the economy. During the first half of this fiscal, the Indian economy grew by 8.9 per, which was above the government expectations.

However, inflationary pressure remained unabated during the period with headline inflation remaining above 8% almost throughout the July-September quarter, prompting the central bank to hike its short-term lending and borrowing rates to raise the cost of money.

The government has set a growth target of 20% -- both in credit and deposit segments -- for banks in 2010-11.

Recently, RBI had cited concern over the disparity between the credit and deposit ratio of banks and said this could lead to further squeeze in the liquidity situation.