Banks' credit growth drags but may improve by March

MUMBAI (Reuters) - Banks' advances continued to limp at the end of 10 months of the financial year 2012-13 compared with a year earlier, but bankers expect a late demand from corporates and loans to the farm sector to prop up growth before the year-end on March 31.

So far this fiscal, banks' advances grew 8.7 percent, compared with 11.2 percent a year earlier, while deposit growth was 7.8 percent compared with 11.4 percent in the same period a year earlier, data from the Reserve Bank of India showed on Wednesday.

"Growth in credit is typically at the rear-end of a financial year because of seasonal factors like pickup in construction activity, tractor purchases, and higher consumption," said a senior banker with a private bank.

The official expects credit growth to be around 14 percent for this financial year, below the RBI's 16 percent projection.

The economy is headed for the weakest full-year growth in a decade, at about 5.5 percent, pulling down a rise in deposits as well as advances, bankers said.

Last month, the RBI cut its key policy rate by 25 basis points and also lowered banks' cash reserve ratio by a similar quantum to spur growth.

Following the RBI's rate cut, major state-owned rates banks reduced lending rates.

As of February 8, banks' advances stood at 50,999.09 billion rupees, up 0.96 percent from two weeks earlier, while deposits were up 0.67 percent at 65,708.71 billion rupees.

(Reporting by Neha Dasgupta; Editing by Prateek Chatterjee)