Credit-deposit growth gap widens further

The gap between credit and deposit growth widened further with deposits fell by Rs 22,427 crore for the fortnight ended 19 October, latest data from the Reserve Bank of India showed. Loans, however, grew by Rs 6,554 crore during the same period. On an year-on-year basis, credit growth was 16 per cent and deposit growth was 13.6 per cent.

RBI has projected 16 per cent growth in advances and 15 per cent growth in deposits for the current financial year.

The central bank has reduced the cash reserve ratio by 25 bps during its second quarter review of monetary policy on Tuesday to 4.25 per cent which will infuse Rs 17,500 crore of primary liquidity in the system. RBI had said the liquidity infusion was required to address the present liquidity tightness in the system which is mainly due to currency demand from public in the festive season and lower government spending. The growing gap between credit and deposit due to sluggish growth of deposits has also made the liquidity situation worsen.

 

Banks have been borrowing around Rs 1 lakh crore from the repo window of RBI in the later part of October. Central bank expects the liquidity crunch to continue for some more time.

RBI has released data on loan flow to different sector of the economy for the month of September which shows credit to industry increased by 15.6 per cent in September 2012 as compared with the increase of 22.9 per cent in September 2011.

“Deceleration in credit growth to industry was observed in all the major sub-sectors, barring chemical and chemical products, cement and cement products and paper and paper products,” RBI said.

Credit to NBFCs increased by 31.8 per cent in September 2012 as compared with the increase of 46.2 per cent in September 2011 while personal loans increased by 12.6 per cent in September 2012 as compared with the increase of 15.2 per cent during the same period of the previous year.