Demand for loans continued to be muted with non-food credit growing 15.04% year-on-year (y-o-y) for the fortnight ended February 7.
Deposit growth continued to outpace credit growth for the fifth fortnight in a row.
Non-food credit grew to R57,414,226 crore with bankers attributing the growth in credit to increased demand from the agriculture sector due to a good harvest season.
Credit growth hit a high of 18.20% y-o-y in the fortnight ended September 18. “Credit is mainly growing due to agriculture. Other sectors such as retail and small and medium (SME) enterprises are growing over 17%. Credit to SMEs increased following the Reserve Bank of India’s (RBI) reclassification of loans to them as priority sector,” said SL Bansal, chairman and MD at Oriental bank of Commerce.
Bankers also hoped more projects would be cleared so that loan growth to the corporate sector would pick up. In the December quarter, loan growth to companies was subdued. For FY14, RBI has projected credit growth of 15% and deposit growth of 14%.
Growth in deposits, however, dropped from the year’s high of 17% in the fortnight ended December 13. Deposits growth saw a spike due to the foreign currency non-resident deposit swap window, which closed on November 30, following which it has cooled to levels of about 15%.
Deposits in the banking system grew 15.58% y-o-y to R75,99,068 crore, while time and demand deposits grew at 15.93% y-o-y and 12.16% y-o-y, respectively. Demand deposits grew to R6,85,507 crore from R6,11,183 crore last year.
Time deposits are those which are locked in with the bank for a fixed tenure and banks pay a higher interest rate on them than demand deposits, which can be withdrawn anytime.