Bank advances continued to grow, albeit at a lower rate of 3.75 per cent in the April-June quarter, compared with five per cent in the same quarter of the last financial year.
Banks disbursed Rs 1.5 lakh crore in the first quarter of 2011-12.
“The effects of high interest rates can be seen on credit demand. Also, credit growth may appear low this year because of high base of last year,” said Vaibhav Agrawal, vice-president (research), Angel Broking.
On a yearly basis, credit growth stood at 20 per cent as on July 1, lower than the annual growth of 21.4 per cent at the beginning of the April-June quarter. RBI has projected credit growth of 19 per cent for financial year 2011-12.
On the other hand, banks were able to garner funds by offering high interest rates on term deposits. According to data released by RBI, bank deposits grew by 5.5 per cent or Rs 2.8 lakh crore in the first quarter of the current financial year. Deposits had shrunk by 3.2 per cent in the same quarter a year ago. “Last year, banks had sold off excess investments in liquid funds to support credit demand,” said Suresh Ganapathy, head of financial research team, Macquarie Securities.
Banks raised deposit rates both on long term, as well as short term maturities by 50-75 basis points in the first quarter of the current financial year. Also, RBI raised the interest rates on savings bank account by 50 basis points to 4 per cent.
On a yearly basis, bank deposits grew by 18.4 per cent as on July 1, compared to 15.8 per cent growth at the beginning of the April-June 2011 quarter. RBI has projected growth of 17 per cent in bank deposits for the entire financial year 2011-12.