With subdued credit offtake, banks are grappling with the challenge to park funds raised through deposits. Their investments in government securities grew over eight-fold during the first quarter of the current financial year.
Bank investments in government securities and other instruments grew by Rs 1,50,273 crore as against Rs 16,212 crore in the same period a year ago. At the end of June 26, 2009, the outstanding investments stood at Rs 13,16,684 crore, according to Reserve Bank of India data.
Bankers said that in the absence of credit demand, they have deployed excess funds in government securities, overnight instruments and liquid funds. They expect the portfolio of such investments to continue to grow in the first half of the current financial year. The total government borrowing stood at Rs 1,75, 000 crore till June 26, 2009, as against Rs 56,000 crore in the same period last year.
Normally credit demand in the first quarter always remains slack. This year, the offtake is much less, reflecting moderation in economic activity and contraction in exports.