The Reserve Bank of India (RBI) today raised the estimate of deposit growth for commercial banks to 19 per cent for the current financial year from 18 per cent set in April 2009 as part of a plan to maintain ample liquidity in the system. This follows an upward revision in money supply growth to 18 per cent, up from 17 per cent projected in the annual policy statement issued in April this year.
Bankers said more resources were expected to flow to banks in the form of deposits with the increase in money supply. The central bank has a responsibility to see that the government’s huge borrowing programme was managed in a least disruptive manner to ensure availability of resources for the productive sectors.
It was important that the increased government borrowings did not crowd out credit flow to the private sector, RBI said. The year-on-year growth in deposits till July 3, 2009, was 21.9 per cent. The outstanding deposit of banks stood at Rs 40,28,707 crore, according to RBI data. On deposit growth across bank groups, RBI said the pace of deposit growth for public sector banks has accelerated, while that for private and foreign banks has slowed down. For 12 months ended July 3, 2009, deposits with public sector banks rose 26.4 per cent, up from 23.1 per cent witnessed in the preceding 12 months.
Private sector banks, which saw moderation in credit growth, also witnessed a slowdown in the pace of deposit accretion. The year-on-year growth in deposits dipped sharply to 6.7 per cent as on July 3, 2009, from 17.4 per cent year ago.
A senior official with a large private sector bank said that when banks decided to go slow on lending after September 2008, it made little sense to raise resources and keep them idle or deploy in low-yielding, short-term money market investments at a loss. In case of foreign banks, moderation in deposit growth was less sharp at 16.4 per cent as on July 3, 2009, from 20.9 per cent a year ago. This was so because these banks have lower deposit base.