Bank loans registered a growth of 21.38 per cent in 2010-11, while deposit growth stood at 15.84 per cent, according to data released by the Reserve Bank of India (RBI).
While credit growth was higher than RBI’s projection of 20 per cent in 2010-11, deposit growth fell short of the 18 per cent projection. Deposit growth for 2009-10 was 17 per cent, while the growth in credit was 16 per cent.
The growth in loans came off sharply in the last fortnight of the financial year ended March 25, compared to the previous fortnight, in which credit growth was 23.20 per cent. In the fortnight ended March 25, banks disbursed Rs 82,593 crore worth of loans. Deposits grew by Rs 64,333 crore in the fortnight.
Analysts and bankers said a growth rate of 18 per cent in deposits and 20 per cent in credit should be sustainable for banks in 2011-12. With policy rates expected to rise further, banks may not be willing to raise loan rates, owing to liquidity coming back into the system. Typically in the beginning of a financial year, the demand for loans is slack.
“We feel interest rates have peaked. But since inflation is still high, there is a chance of RBI raising policy rates further in May. However, a rise in policy rates will not necessarily mean an immediate hike in deposit and lending rates,” said RK Bansal, executive director and group head (retail banking), IDBI Bank. He said IDBI Bank had no plans to cut retail term deposit rates, nor to raise lending rates. “For the current financial year, because of a low-base, I expect around 20 per cent growth in deposits. I also expect 18-20 per cent growth in credit,” Bansal said.
Liquidity concerns have also ebbed since the beginning of the financial year, as banks become net lenders to the central bank’s liquidity adjustment facility. Liquidity was in deficit mode during the second half of the current financial year, which saw rates heading north.
“Currently, there are no liquidity pressures. Hence, banks may want to withdraw their special rates on deposits. But banks may not reduce rates, as deposits from retail segment are yet to pick up. So they may want to wait and watch before slashing interest rates on deposits,” said a official from a public sector bank.
