The wedge between credit and deposit growth has persisted, with bank deposits falling for the fortnight ended December 14. On a year-on-year basis, deposits grew 13.3 per cent to Rs 64.3 lakh crore but fell 0.1 per cent sequentially, shows data released today by the Reserve Bank of India (RBI).
RBI has projected deposit growth of 15 per cent for the current financial year. However, many bankers feel RBI's projection might not be achieved.
Despite this, most banks have been cutting their deposit rates as the interest rate cycle turns southward. Pratip Chaudhuri, chairman of the largest lender, State Bank of India, agrees lower rates are making it difficult to attract deposits.
On Monday, a few banks did reverse the trend by raising deposit rates by 25-35 basis points in select maturities. Federal Bank raised these by 25 bps in domestic term deposits of one to three years, to nine per cent. Dena Bank increased it in the one year to less than two years bucket by 35 bps, to 9.1 per cent. The former said it had done so because of asset liability management. Dena Bank said it wished to align deposit rates with those of other major banks. However, according to analysts, the rise is also due to low accretion of deposits.
Credit growth was 16.3 per cent on a year-on-year basis to Rs 49,62,649 crore for the fortnight ended December 14. During the fortnight, it grew 0.07 per cent from Rs 49,59,062 crore earlier.
RBI data shows credit growth has failed to improve in the second half of the financial year till date.
This is primarily due to slowing economic growth and high interest rates. RBI has revised the credit growth projection downwards to 16 per cent for this year, from the 17 per cent projected in April and July. The revision was made in the second-quarter review of monetary policy, on October 30.