Despite the Reserve Bank of India (RBI) announcing a series of rate cuts , bank loans have dropped by Rs 25,266 crore during the fortnight in the two weeks ended April 24, taking outstanding advances to Rs 27,46,174 crore.

According to the data released by the central bank on Thursday, credit remained flat at 18.10%, or at Rs 4,21,040 crore in the 12 months through April 24, while total bank deposits too have stayed almost flat at 22.54%, or Rs 7,21,632 crore, in the same period to Rs 39,23,004 crore.

In the two weeks ended April 10, credit rose 18.8%, or by Rs 4,38,632 crore in the 12 months through April 10, while total bank deposits have risen by 22.13%, or Rs 7,06,989 crore, in the same period to Rs 39,01,048 crore.

With liquidity scenario remaining strong, which is evident with call rates hovering around 3%, the central bank, on Tuesday had decided to conduct just one liquidity adjustment facility (LAF), with effect from Wednesday. It noted that the second LAF will be conducted only on reporting Fridays. On September 16, 2008, the central bank had announced that a second LAF would be conducted on a daily basis till further notice.

On Wednesday, the central bank absorbed Rs 1,44,913 crore compared to Rs 1,44,917 crore, on Tuesday. On Monday, too banks had parked Rs 1,44, 911 crore with the RBI. There are various factors which have affected the credit growth in the system. Both the private sector and foreign banks are drastically cutting down their business growth 2009-10 due to fear for rising non-performing assets.

Also due to the economic slowdown, the demands for both the credit from the end users have been constrained. Moreover, a depressed equity markets has made difficult for Indian corporates to raise funds and has led to a postponement of their capacity expansion plans, thereby postponing demand for bank credit. The lean season is also contributing to a slack in credit growth. Robert Prior-Wandesforde, senior SE Asian economist has said that India not recovering just yet despite some apparently positive signals, ?but there remain good reasons to believe the second half will see GDP growth start to surprise on the upside. Fiscal deficit needs to be tackled by next government and not through capital spending cuts, he said.