Growth of deposits outpaces disbursal of non-food credit

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SummaryDeposits in the banking system grew faster than non-food credit disbursed by banks

Deposits in the banking system grew faster than non-food credit disbursed by banks for the second consecutive fortnight, according to the latest data released by the Reserve Bank of India (RBI) on Monday.

Non-food credit growth was 15.27% y-o-y against deposit growth of 16.99%, data for the fortnight ended December 13 show. Deposits stood at R75,24,217 crore at the end of the fortnight against R64,30,998 crore in the same period last year.

Bankers and experts attributed the uptick in deposit growth to the special swap window for foreign currency non-resident (FCNR) deposits, which ended on November 30.

“Deposit growth has been in line with the money growth. Part of that could be due to the external funds that came through the FCNR window. The drop in gold prices could also have helped deposits grow,” said Ananda Bhoumik, senior director at India Ratings. He added that a crossover of credit growth outstripping deposit growth was unlikely for the next six months.

Time and demand deposits grew 17.39% and 13.29% y-o-y, respectively. Time deposits grew to R68,30,952 crore at the end of the fortnight against R58,19,090 crore in the same period last year, while demand deposits grew to R6,93,262 crore against R6,11,908 crore last year.

Meanwhile, non-food credit grew 15.27% to R55,93,792 crore against R48,52,841 crore in the same period last year. Credit growth had reached a year high of 18.4% in September following the RBI’s extraordinary liquidity tightening measures in July. The measures had driven up interest rates in the commercial paper (CP) market, forcing companies to turn to banks to finance their working capital needs.

Since then, liquidity restrictions have been eased and interest rates on the marginal standing facility reduced to 8.75%, prompting corporates to return to the CP market.

Bankers say the current credit growth is in line with the RBI’s estimate of credit growth for the fiscal year of 15%. For deposits, the RBI expects it grow 14%.

Bankers added that growth in the infrastructure segment is still to pick up and that the housing and retail segments are getting a push. Recently, the country’s largest bank, State Bank

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