Bank deposits outpace credit growth in H1

Deposit accretion in domestic banks continued to outpace loan disbursements in the current financial year and the trend prompted both lending and deposit rate cuts by several banks in the period.

According to Reserve Bank of India (RBI) data released on Thursday, bank deposits grew by Rs 91,853 crore in the period between June 29 and September 7, 2012, while outstanding credit fell by Rs 11,153 crore in the same period.

In the first five months of the current financial year, deposits grew up by Rs 2 lakh crore, while credit was up by Rs 44,904 crore.

“Credit growth did not pick up as there was not much demand while people opted to park their savings in bank deposits rather than going for risky investments in an uncertain market,” a banker said pointing out that this led to a surge in deposits while disbursements lagged behind.

Several banks like State Bank of India, ICICI Bank and HDFC Bank lowered deposit rates in order to protect margin erosion.

Alongside, lending rates and processing charges were cut to boost credit demand.
“With new investments in big ticket projects on hold, we are focussing on retail segment to boost credit growth in the festive season,” said another bank.

He also observed that credit offtake typically picks up in the third and fourth quarter of a financial year fuelled by festive demand in the country.

The RBI has projected annual deposit growth of 16 per cent and annual credit growth of 17 per cent by the end of current financial year.

However, as of September 7, deposits grew by 14.36 per cent and credit grew by 16.55 per cent as compared to same period last financial year.