Deposits surge, credit growth bucks trend

Our Banking Bureau

Mumbai, Aug 28: AN inter-quarter analysis of select liabilities and assets of scheduled commercial banks during 2000-01 in relation to 1999-2000 and during the first quarter of 2001-02 as against the corresponding quarter of 2000-01 shows interesting developments.

Aggregate deposits showed an increase of Rs 40,561 crore during the first quarter of 2000-01 as compared to Rs 15,170 crore in the previous year.

The rise was even higher at Rs 50,456 crore during the first quarter of 2001-02.

Non-food credit exhibited a substantial contra-seasonal increase of Rs 16,485 crore during the first quarter of 2000-01 in contrast to declines of Rs 3,520 crore and Rs 3,126 crore during the corresponding quarter of 1999-2000 and 2001-02, respectively.

A comparison of the first quarters of 1999-2000 and 2000-01 must, however, account for the fact that the gap between the last reporting Friday of 1999-2000 and the balance-sheet date widened to a full week, inflating the deposit and credit growth during the first fortnight of April 2000.

Between March 24 and March 31, 2000, demand deposits and non-food credit increased by Rs 9,093 crore and Rs 14,372 crore, respectively, as compared with Rs 5,929 crore and Rs 6,387 crore, respectively, during the corresponding period of the previous year. In the case of the first quarter of 2001-02, the last reporting Friday happened to be one day before the last working day of the quarter.

Thus, the usual quarter-end bulge in non-food credit got reflected in the fortnight ended July 13, 2001. During the first quarter of 2001-02, the non-food credit experienced a persistent decline up to June, even after the usual unwinding of the year-end bulge.

However, despite lower first quarter-end bulge in aggregate deposits in 2001-02 in relation to the preceding year, the increase in aggregate deposits in 2001-02 worked out to be much higher than that in the corresponding quarter of 2000-01 on account of substantial accretion in time deposits of Rs 24,634 crore during April 20-June 29, 2001.

The usual bulge in investments seen at the beginning of the year, in government securities (GoI-Secs) of Rs 18,839 crore was somewhat lower during the first quarter of 2000-01 as against an increase of Rs 21,899 crore during the first quarter of 1999-2000.

The deceleration in investment in GoI-Secs and the cash reserve ratio (CRR) at the staring of the year, facilitated the contra-seasonal expansion in non-food credit and normal expansion in food credit during the first quarter of 2000-01.

During the first quarter of 2001-02, the cash reserve ratio (CRR) cut and an appreciable expansion in deposits with no commensurate non-food credit off-take, led to a bulge in banks investments in GoI-Secs as well as strong accretion in net bank reserves. As the financial markets turned uncertain and monetary conditions tightened during the second quarter of 2000-01, some deceleration was seen investments.

Thus, the net bank reserves inched up to Rs 5,420 crore during this quarter. As the financial markets stabilised and liquidity conditions improved with a growth in time deposits (Rs 43,627 crore) largely driven by IMDs during the third quarter, the non-food credit off-take increased appreciably (Rs 24,891 crore) along with a jump in investments in GoI-Secs (Rs 22,345 crore).

During the fourth quarter of 2000-01, the CRR cut as well as contra-seasonal dampening of non-food credit growth led to a higher investment in GoI-Secs than seen in the last quarter of 1999-2000.