Credit grows 11.25 per cent year-on-year up to December 18.
While bank credit growth seems to be showing signs of revival, deposits could soon emerge as the new area of concern for bankers.
During the fortnight ended December 18, 2009, bank credit grew Rs 21,593 crore while deposits fell Rs 21,873 crore.
At present, most banks are offering 6-6.5 per cent on one-year deposit, the lowest in recent times, while inflation based on the wholesale price index touched a 10-month high of 4.78 per cent in November. Though bankers attributed the decline in deposits to advance tax payment by companies, the rising inflation could turn real returns on fixed deposits to negative.
According to data by the Reserve Bank of India (RBI), bank credit grew 11.25 per cent year-on-year up to December 18, 2009. During the quarter up to December 18, credit offtake stood at Rs 68,136 crore as against Rs 1,02,930 crore in the second quarter of this financial year.
| EBB AND FLOW | ||||
| Fortnight- ended | Credit flow | Y-o-Y growth | Deposit mobilised | Y-o-Y growth |
| Apr 10 | 1,429 | 18.80 | 70,726 | 22.10 |
| Apr 24 | -25,266 | 18.10 | 21,956 | 22.50 |
| May 8 | 5,882 | 17.20 | 29,260 | 22.60 |
| May 22 | 16,306 | 15.86 | 15,730 | 22.56 |
| Jun 5 | 21,460 | 15.70 | 3,656 | 22.00 |
| Jun 19 | 13,006 | 15.80 | -5,502 | 22.00 |
| Jul 3 | 28,532 | 16.30 | 62,559 | 21.9 |
| Jul 17 | -21,185 | 15.34 | -18,656 | 21.78 |
| Jul 31 | 29,471 | 15.79 | 59,338 | 21.79 |
| Aug 14 | -5,062 | 14.90 | 9,338 | 21.8 |
| Aug 28 | 5,612 | 14.09 | 21,616 | 20.51 |
| Sep 11 | 18,374 | 13.24 | 8,123 | 20.19 |
| Sep 25 | 47197 | 12.62 | 30,215 | 19.79 |
| Oct 9 | 17160 | 10.75 | 41,347 | 19.98 |
| Oct 23 | -21,750 | 9.65 | 8,408 | 19.02 |
| Nov 6 | 23,147 | 9.78 | 14,360 | 18.55 |
| Nov 23 | 7,056.63 | 10.08 | 18,617.30 | 19.03 |
| Dec 4 | 20,930 | 10.50 | 17,713 | 18.32 |
| Dec 18 | 21,593 | 11.25 | -21,873 | 17.84 |
| Note: Figures in Rs crore; y-o-y growth (%) at the end of fortnight Source: RBI | ||||
“Most documentation and disbursement takes place in the last quarter. We expect the credit growth to be around 15 per cent in this financial year. Since credit growth was not picking up, we had moderated our deposit growth. We are focusing more on CASA (current account, savings account), which is growing at 23 per cent,” said Bank of India Executive Director M Narendra.
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Though banks are nowhere close to the 18 per cent credit growth target of RBI, bank executives said it would not be difficult to reach the target.
Bank of India expects credit to grow at 17 per cent during the third quarter.
On a year-on-year basis, deposits grew 17. 85 per cent during the fortnight ended December 18. Time deposits declined Rs 21,421 crore while demand deposits fell Rs 452 crore.
“The deposits are not a concern as companies have availed of funds to pay advance tax on December 15 and the money will come back to the system,” said Narendra.
The other public sector lender, Union Bank of India, expects credit growth to be around 13 per cent during the third quarter. “Due to lack of credit off-take, banks have not focused on increasing their deposit base,” said Union Bank of India Executive Director S Raman. Bankers said the demand for credit had mainly came from infrastructure, construction and steel.
Generally, investors withdraw from bank deposits during the last quarter to meet investment needs. A senior executive of a large public sector bank said the return on deposits had become less attractive due to the rising inflation. As a result of decline in deposits, banks’ investment in government securities fell by Rs 40,402 crore during the fortnight ended December 18, 2009.