In a clear indication of the headwinds faced by the economy, credit growth in the banking system has slowed substantially in the third quarter of the current financial year so far, compared with the year-ago period.

In the current quarter (October-December 2013) so far (up to December 13), credit offtake from banks was relatively tepid, of the order of Rs 34,821 crore.

However, during the same period a year ago, credit offtake was about 4.5 times higher (or Rs 1,57,623 crore).

Bankers say, large corporates are not taking up fresh capital expenditure proposals in view of the policy logjam and impending general elections.

In this backdrop, banks are focussing their energies on lending to the retail, agriculture and SME segments. Besides, there is good credit demand from non-banking finance companies.

According to the chief of a public sector bank, lending to public sector units is a safe bet when the economy is going through a rough patch. Moreover, preserving asset quality is more important now than aggressively chasing new business.

In the reporting period, deposits have shown relatively robust growth as compared with the year-ago period, according to Reserve Bank of India’s scheduled banks’ statement of position in India.

Deposits in the banking system increased by Rs 1,65,795 crore in the reporting period against Rs 22,167 crore in the year-ago period.

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