Despite soft interest rate regime, the bank loans have dropped Rs 21,186 crore for the fortnight ended 17 July 2009.
The latest Reserve Bank of India (RBI) data on the scheduled banks? statement of position showed that credit growth has slid to 15.38% or Rs 3, 70,254 crore, as against 16.34% for the fortnight ending 3 July, 2009.
At the same time, deposit growth stayed flat at 21.78%, or Rs 7,17,304 crore, as against 21.93% or Rs 7,24,679 crore, for the fortnight ending 3 July, 2009.
During the first quarter review for July 2009, the central bank increased the deposit growth projection to 19% from the previous 18%for 2009-10, but kept the credit growth projection unchanged at 20% for financial year 2009-10.
?The major issue on flow of credit to economic sensitive, but high risk sectors is to be addressed, as providing liquidity support is not the solution. The need to involve Development Financial Institutions to buy credit risk from lenders will help flow of more than adequate funds to such borrowers. This will enable the lenders to price the credit at lower price factoring the credit risk premium paid to off-load risk,? said J. Moses Harding, head of global markets group with IndusInd Bank.
He also noted that liquidity is not an issue but the cost of liquidity is a concern as demand for funds from government and private borrowers will increase on move into busy season starting October 2009. Banks have deployed Rs 1, 18,625 crore with the RBI through the reverse repo window on Tuesday. Over the past few months, the banking sector has seen a rapid slide in the credit growth in comparison to the deposit growth, despite being flushed with ample liquidity. On an average, banks are seen parking an average of Rs 1, 00,000 on a daily basis, with the RBI reverse repo window, nearly for the past two months.