High deposit rates have finally succeeded in wooing customers. During the fortnight ended August 27, deposits mobilised by banks went up by Rs 38,658 crore as against a decline of around Rs 8,000 in the previous fortnight.
After RBI asked banks to beef up deposit mobilisation in its first quarter monetary policy review, banks started raising rates. Most banks raised on short- and medium-term fixed deposit by up to 150 basis points.
RBI has projected 18 per cent deposit growth for 2010-11. So far, deposit growth has not exceeded 15 per cent in this financial year.
| THE NUMBERS FORNIGHTLY CREDIT AND DEPOSIT GROWTH (RS CRORE) | ||||
| Fortnight- ended | Credit flow | Y-o-Y growth | Deposit mobilised | Y-o-Y growth |
| Apr 9, ’10 | 826 | 17 | 43,501 | 16 |
| Apr 23, ’10 | -26,483 | 17.13 | -23,327.90 | 14.97 |
| May 7, ’10 | 13,030 | 17.25 | 24,471 | 14.72 |
| May 21, ’10 | 2,406 | 18.04 | -4,997 | 14.16 |
| Jun 4, ’10 | 57,895 | 19.12 | -9,024 | 14.33 |
| Jun 18, ’10 | 22,343 | 19.59 | -23,761 | 13.92 |
| Jul 2, ’10 | 91,972.53 | 21.70 | 1,15,162 | 14.92 |
| Jul 17, ’10 | -38,913 | 21.27 | -40,867 | 14.55 |
| Jul 31, ’10 | -6,211 | 19.67 | 47,759 | 13.98 |
| Aug 13, ’10 | 7,245 | 20.13 | -8,016 | 14.10 |
| Aug 27, ’10 | -13,114 | 19.40 | 38,658 | 14.44 |
| Growth (%) at the end of fortnight Source: RBI | ||||
Bank credit fell by Rs 13,114 crore during the fortnight. It grew by 19.4 per cent on a year-on-year basis at the end of the fortnight. Outstanding bank credit stood at Rs 33,51,396, against Rs 28,06,741 crore at the end of the previous fortnight.
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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.
“Credit flow may not have happened from the banking system but corporate have availed of the alternate sources. They have raised funds from other routes like commercial papers (CPs) and mutual fund,” said a senior public sector executive.
Last month, yields on CPs had touched a one-year high. This was also because of the banking system shifting to base rates as corporates had no means to raise short-term capital.
“Demand for credit is not robust. We had expected a moderate credit growth in this quarter. With funds flowing from other sources to the commercial sector, demand from banking will be slow for some more time,” said a senior executive of another public sector bank.
The central bank has projected 20 per cent growth in credit for the current financial year.
A number of banks have also increased their benchmark prime lending rates (BPLR) in a bid to coax more customers to move to the base rate system, which came into effect from July 1. So far, base rates have been untouched.
As a result of high deposit mobilisation and drop in credit growth, banks’ investment in government securities went up by Rs 23,674 crore during the fortnight.