Credit growth has been hovering around 15% for the past four months and bankers say this is in line with the Reserve Bank of Indias (RBI) credit projections for the financial year. For FY14, RBI has projected credit growth of 15% and deposit growth of 14%.
Outstanding non-food credit at the end of the fortnight was R58,37,218 crore compared to R50,74,574 crore in the same period last year. Credit growth had hit a high of 18.20% y-o-y in the fortnight ended September 18. Credit demand had increased in the months of August and September as the RBI had taken extraordinary liquidity tightening measures in July to stem the slide of the value of the rupee, which had hit a lifetime low of R68.825 in August against the dollar.
The tightening measures had pushed up interest rates on commercial paper (CP), making it costlier. Hence, companies looked at banks for their funding requirements.
Meanwhile, deposits continued to outpace credit marginally and grew at 15.55% y-o-y to R76,92,309 crore. Growth in deposits dropped from the years high of 17% in the fortnight ended December 13. Deposit growth saw a spike due to the foreign currency non-resident deposit swap window that closed on November 30. Following that, deposit growth has cooled to levels of about 15%.
Bankers say they are not looking at changing deposit rates as they think there is enough liquidity in the system. This is because there isn't strong growth in credit demand and there has been a comfortable liquidity condition, said Arun Kaul, chairman and managing director of UCO Bank.