It will be difficult for banks to match last years credit growth, particularly the last two weeks in the previous financial year, which saw huge spurt in growth of advances, said Sudhir Kumar Jain, the executive director, Bank of Baroda. At the second quarter review of the monetary policy, RBI had cut credit growth projection for FY13 by one percentage point to 16%.
Meanwhile, bank deposits growth remained lacklustre at 13.2% year-on-year (y-o-y) to R65,70,871 crore in the fortnight, according to latest RBI data. Between April last year till date, deposit growth has been 7.5%, compared with 11.44% in the corresponding period of last financial year.
In the fortnight ended February 8, demand deposits growth was 2.8% y-o-y, and time deposits growth was at 14.3%. Time deposits are those that are locked in with the bank for a fixed tenure and banks pay a higher interest on them than on demand deposits, which can be withdrawn anytime.
While, some bankers have argued that real returns on deposits have eroded because of high inflation and funds have moved towards gold and real estate, data suggest a lot of migration of money towards fixed deposits have also taken place as interest rates remain high.
Bankers think it will be hard to meet the deposit growth of 15% projected by RBI for FY13. Some of the banks like ICICI Bank and Axis Bank raised interest on deposits by 25-30 basis points on longer tenure maturities in January. Though credit demand is still weak, deposit is weaker. So, there is a liquidity stress building up. It looks like banks will have to use there excess SLR to lend, Jain said.