Credit growth in the financial year so far (up to September 5) has been tepid while deposit growth has been robust, going by Reserve Bank of India data.
In the financial year till date, banks disbursed credit aggregating to ₹58,204 crore while they saw healthy deposit inflows aggregating to ₹2,07,731 crore.
While the sentiment in the stock market may be upbeat on expectations that the BJP Government will unveil a host of reforms to rev up the out-of-steam economic engine, the ground reality, as signified by credit offtake, seems a little different.
In the reporting period of the last financial year (up to September 6, 2013), banks disbursed 4.45 times more money than in the current financial year so far. The first half of the financial is generally considered a lean season for credit growth.
Bankers say that loan growth is happening only in retail, agriculture and small and medium segments. Demand for loans in the corporate segment has almost dried up.
With banks not having too many big-ticket credit deployment opportunities, they ended up investing the deposits they raised in Government securities. Banks invested ₹1,62,248 crore in the securities during the financial year so far.
This situation of surplus liquidity (via deposit accretion) and slower-than-anticipated credit pick-up had prompted State Bank of India to announce on Tuesday a cut in interest rates on retail term deposits.
The interest rate on deposits of one year to less-than-three-years duration was pared to 8.75 per cent from 9 per cent. Other banks too are expected to cut their deposit rates in order to protect their margins.
In the year-ago period, credit and deposit growth were healthy at ₹2,59,328 crore and ₹2,55,023 crore respectively. Incremental investments in Government securities was at ₹1,15,158 crore.
In the reporting fortnight ended September 5, banks reported credit and deposit growth of ₹24,059 crore and ₹84,415 crore respectively.