Bank credit rises 26%

The bank credit grew by 25.9 per cent till August 15, showing little signs of moderation. The rise defies a series of interest rate hikes effected by banks.

The latest data released by the Reserve Bank of India (RBI) this evening showed that the credit extended by scheduled commercial banks, including regional rural banks, increased by 25.89 per cent to Rs 24,40,077.81 crore at the end of August 15 this year compared to Rs 19,38,231.46 crore at the end of August 17, 2007.
 

ROBUST NUMBERS Figures of scheduled commercial banks including RRB’s (Rs crore)
	17-Aug-07	15-Aug-08	%  growth

 

Deposits27,44,46333,38,18921.6 Demand3,81,6974,45,05816.5 Time23,62,76728,93,13122.4 Bank Credit19,38,23124,40,07825.9 Loan, cash crredit &18,57,05823,39,78125.9

The RBI increased the cash reserve ratio and the repo rate to 9 per cent each to slow down credit growth and control inflation. The rise in credit growth beyond the stipulated 20 per cent was a result of the high fund demand from oil companies. The government is still to reimburse them for selling petroleum products below cost and with crude petroleum prices hovering around $115-120 a barrel, the three public sector oil marketing companies are raising more money to pay their raw material bills. There is also a strong demand for funds to finance infrastructure projects.

Bankers, however, expect a moderation in demand as the lending rates have risen by over 125 basis points in the last two months. “Typically, the impact of rising lending rates is seen with a lag,” said a bank executive. The public sector banks that sent their annual targets to the finance ministry, are still targeting growth in excess of 20 per cent.

The deposit growth up to August 15 has also exceeded the 17 per cent target set by RBI for the current financial year. The total deposits of all scheduled commercial banks, including RRBs, went up 22.04 per cent to Rs 33,49,390.35 crore at the end of August 15 this year from Rs 27,44,463.28 crore on August 17 last year. The demand deposits, or those with a tenure up to one year, rose 16.60 per cent to Rs 4,45,057.84 up to August 15 this year.

Time deposits, which have a tenure exceeding 12 months, rose 22.45 per cent to Rs 28,93,131.41 crore. With the stock markets remaining volatile and deposits rates also going up, many investors have opted to park surplus cash in one-three year deposits that earn 10 per cent a year.