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Bank credit offtake surges over 23 percent deposits up 16 percent

Thursday, 24 March 2011, 03:23 Hrs

Mumbai: Credit offtake from public and private sector banks in the country grew by over 23 percent for the one-year period ended March 11, indicating an upswing in the industrial activity, says the RBI.

According to the apex bank, credit offtake during the period stood at Rs 39.37 lakh crore against Rs 32.20 lakh crore a year ago.

During the period, deposits went up to over Rs 52.85 lakh crore from Rs 45.50 lakh crore as on March 12, 2010, shows the latest data from the Reserve Bank.

This is a rise of over 16.1 percent on an annual basis.

RBI, in its annual monetary policy at the beginning of the financial year, had estimated credit offtake to grow 20 per cent this financial year.

However, in December 2010 the apex bank expressed concern at the widening ratio between the credit and deposit rates of banks. This has the potential to affect the supply of liquidity in the system due to higher lending by the banks vis-à-vis lower deposits.

In its recent third quarterly monetary policy review, RBI had observed that the deposit growth moderated during 2010.

Several banks raised their deposit rates after the second quarter review of 2010-11, which contributed towards a larger deposit mobilisation in December. Consequently, deposit growth increased to 16.5 percent by end-December 2010, close to the indicative projection of 17 percent for 2010-11.

However, annual nonfood credit growth has been above the Reserve Banks indicative projection of 20 percent since early October 2010, rising to 24 percent by end-December 2010, it said.

The wide gap between credit growth and deposit growth resulted in a sharp increase in the incremental non-food credit-deposit ratio to 102 percent by end-December 2010, up from 58 percent in the corresponding period of previous year, it added.
Source: PTI

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