Deposit growth slowed to 4.9 per cent from 7.6 per cent in April-Sept 2009.
Compared to last year, credit grew at a faster pace in the first half of 2010-11, according to data released by the Reserve Bank of India (RBI).
The total outstanding credit of the banking system has risen 5.6 per cent to Rs 34,22,291 crore since the beginning of this financial year. The credit growth rate in the first half of the previous financial year was 3.5 per cent.
IDBI Bank’s Chief Financial Officer P Sitaram said the trend did show improvement in the first half over April-September 2009. However, one should not read too much into the numbers.
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First, in 2009-10, the economic and business climate was poor due to the global financial crisis. Second, this year, banks have given short-term credit of over Rs 1,00,000 crore to telecom companies to pay spectrum fee (3G and broadband wireless access) in the first quarter. This is a one-off activity.
Deposit growth, on the other hand, has sharply slowed from 7.6 per cent in April-September 2009 to 4.9 per cent in the first half of 2010.
RBI has projected 18 per cent deposit growth for 2010-11. So far, it has not exceeded 15 per cent this financial year. Banks continue to struggle when it comes to attracting depositors.
During the fortnight ended September 24, deposits mobilised by banks went up by Rs 16,590, as against an increase of around Rs 20,465 crore in the previous fortnight. Also, bank credit rose by Rs 39,364 crore, a larger quantum than deposits. It grew 19.04 per cent on a year-on-year basis at the end of the fortnight. Outstanding bank credit stood at Rs 34,22,291 crore, as against Rs 33,82,927 crore at the end of the previous fortnight.
Bankers said they expected modest credit demand in the current quarter. The demand was robust during the first quarter of the financial year, predominantly because of the huge demand from telecom companies for 3G and broadband wireless access.
Last month, yields on commercial papers had touched a one-year high. This was also due to banks system shifting to the base rate system, which left companies with no other option to raise short-term capital. This is because banks cannot lend below their base rates.
The central bank has projected a 20 per cent credit growth for the current financial year.
A number of banks have also increased their benchmark prime lending rates (BPLRs) in a bid to coax customers to move to the base rate system, which came into effect from July 1.