The Reserve Bank of India (RBI) has been prompted to consider a detailed study of the composition of credit disbursements by banks in various segments, given the continued high level of growth."There is continued growth in credit and we are monitoring it closely. The effect of monetary policy actions on credit will come with a lag. We will have to study the composition of credit in various segments," Y V Reddy, governor of RBI, today said.Non-food credit grew almost 32% year-on-year to Rs 15,56,100 crore as on September 1, 2006, against deposit growth of 21.3% to Rs 22,51,701 crore. Banks are required to invest 25% of their deposits in government securities for meeting the statutory liquidity ratio (SLR) norms and deposit another 5% with the RBI as cash reserve ratio (CRR)."The balance between deposit accretion and credit growth also needs to be studied," Reddy said.The credit-deposit ratio as on September 1 was 70.73%, but the incremental credit-deposit ratio is close to 100%. The ratio was over 100% in the whole of last year.There are concerns in the system about the sustanability of current level of credit growth with increase in deposits of the banking system lagging. Banks have been funding the high credit growth over the last few years mostly through liquidation of their excess investments in government securities.The average staturoty liquidity ratio (SLR) holdings of the banking system have fallen from a high of over 40% to less than 30% now. The minimum SLR requirement is 25%.Reddy said: "all these factors will have to be monitored on a continued basis."Retail credit expanded at rates ranging between 22-41% since FY02 and accounted for 26.7% of the incremental non-food credit in FY06. The share of advances to individuals increased from about 10% of total bank credit in March 2002 to nearly 25% in January 2006. The increase in non-food bank credit was 32.9% (Rs 3,71,993) in FY06 on top of an increase of 31% (Rs 2,60,164 crore).The increase in retail credit in the current financial year so far has actually slowed down from very high growth witnessed in April-May 2006.Retail lending by banks had risen 74% on a year-on-year basis, driven by a 115.5% increase in housing loans in the first two months of the current year.
