Flow of credit to the commercial sector from sources other than banks doubled in the first quarter of the current financial year, the Reserve Bank of India (RBI) said in the macroeconomic and monetary development report on Monday.
While credit growth was in line with projection, it is expected to fall, the central bank said a day ahead of the first quarter monetary policy review. Bank credit grew by 17.4 per cent in mid-July 2012 from 16.8 per cent at end of March 2012. RBI had projected credit growth of 17 per cent for the current financial year. “Hence, credit growth is in line with the indicative trajectory of 17 per cent for the year. Anecdotal evidence from bankers suggests that there may be some deceleration ahead,” the report said.
The central bank said there has been 41 per cent increase in total flow of financial resources to the commercial sector. There was a twofold increase in funding from non-bank domestic sources. “The marked increase was on account of higher issuances of commercial papers, accommodation from all Indian financial institutions, net credit by housing finance companies and LIC’s net investment,” said RBI.
Data showed net issuance of commercial papers subscribed by non-bank entities rose to Rs 35,500 crore in April-June from Rs 23,430 crore in the same period last financial year. The net credit by housing finance companies grew to Rs 68,500 crore in the first quarter of the current financial year from Rs 19,800 crore in the previous year.
The central bank said industrial sector accounted for 36.1 per cent of the incremental credit flow, while services and personal loans accounted for 28.6 per cent each in the first quarter of the financial year.
In terms of deposit growth, RBI said banks garnered more funds this quarter than in comparable periods of recent years. However, annual deposit growth continued to stay under RBI’s projection of 16 per cent for 2012-13. As on July 13, bank deposits grew by 14.7 per cent. Also, the increase in deposit across bank groups was skewed, RBI said.
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Data showed that private sector banks recorded deposit growth of 17.1 per cent while deposit growth in public sector banks was at 14.5 per cent as on July 13, 2012.
The central bank pointed out that in spite of rate hikes, real interest rates were lower than in the pre-crisis period. “In this context, there is a need to look at non-monetary factors that are constraining growth as current monetary and liquidity conditions are not impinging upon growth significantly,” said RBI.
In April 2012, the central bank had cut policy rate by 50 basis points. It maintained the status quo in the mid-quarter policy review in June. RBI had increased policy rate 13 times in March 2010-October 2011 to tame inflation.