Loan demand from new projects is still not there, but demand for loans from companies for working capital and refinancing should be better in the fourth quarter, said Sudhir Kumar Jain, the executive director of Bank of Baroda. Since loan demand from companies are muted, most banks are trying to increase the size of retail portfolios.
Meanwhile, bank deposit growth was lacklustre at 13.08% year-on-year (y-o-y) to R65,27,117 crore in the fortnight ended January 25, according to RBI data. The latest data show the total deposits in the banking system shrank slightly by R11,478 crore, or 0.18% compared with the fortnight ended January 11. Since April 2012, deposit growth has been 6.78%, according to the latest data. Bankers said deposits may be hard to come by since high inflation has eroded real returns for depositors and prompted them to invest in gold and real estate.
Unless inflation comes down, deposit growth will not improve and seeing this problem, RBI had cut its cash reserve ratio by 25 basis points on January 29 so that liquidity crunch can be managed, Jain said, adding deposit growth of 15% projected by RBI for FY13 looks challenging in the current environment. Some banks like ICICI Bank and Axis Bank raised interest on deposits by 25-30 basis points on longer tenure maturities in January. But most other bankers said that unless credit demand improves it will be difficult for them to increase deposits rates in FY13.