The gap between credit and deposit growth widened for the fortnight ended October 19, shows the latest data from the Reserve Bank of India. Deposits fell by Rs 22,427 crore for the fortnight and loans grew by Rs 6,554 crore. 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 this financial year.
RBI reduced the cash reserve ratio by 25 bps during its second quarter review of monetary policy yesterday, to 4.25 per cent. This should infuse Rs 17,500 crore of primary liquidity in the system. RBI had said this was required to address the present tightness in the system, mainly due to currency demand from the public in the festive season and lower government spending.
The growing gap between credit and deposit growth, due to less growth in the latter, has added to the liquidity problem. Banks have been borrowing around Rs 1 lakh crore daily from the repo window of RBI in the later part of October. The central bank expects the liquidity crunch to continue for some more time.
RBI has released data on loan flow to different sectors for September. These show credit to industry increased 15.6 per cent in September as compared with an 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,” it said.
Credit to non-bank finance companies rose 31.8 per cent in September compared with a rise of 46.2 per cent in September 2011. Personal loans increased 12.6 per cent in September against the increase of 15.2 per cent during the same period last year.
