High inflation hit growth of bank deposits in Q1

 The growth of aggregate deposits in the corresponding quarter of last fiscal was 21.1 per cent, the Reserve Bank said in its report on ‘Quarterly Statistics on Deposits and Credit of scheduled Commercial Banks — June 2010’. However, the credit offtake of scheduled commercial banks witnessed a growth of 20.4 per cent during the April-June period, as against 14.3 per cent in the comparable quarter of the last fiscal.

The total deposits at the end of June stood at Rs 45,40,130 crore during the first quarter of this fiscal, while credit was Rs 33,56,757 crore.

The higher credit growth implies an increased business activity in the economy. The Indian economy grew by 8.9 per cent in the April-June quarter, which was above the government expectations. However, inflationary pressure remained unabated during the period with headline inflation remaining in double digits throughout the June quarter, prompting the central bank to hike its short term lending and borrowing rates to raise the cost of money.

The government has set a growth target of 20 per cent for banks both in the credit and deposit segments in the current fiscal. The aggregate deposit growth of banks in rural areas during April-June period was 15.6 per cent as against 18.9 per cent in the year ago period. Meanwhile in urban areas, the growth rate of bank deposits plunged even more steeply to 15.2 per cent at the end of June, from 22 per cent in the corresponding period last year.

However, during the period gross loan disbursal by the banks grew by 18.3 per cent in rural areas, as against 15.1 per cent last year. In towns and cities, the rate of growth of loan disbursal was 20.6 per cent in June quarter, as against 19 per cent in the same period previous fiscal.

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