Credit growth appears to be moderating as money becomes costlier. Data put out by the Reserve Bank of India (RBI) shows that non-food credit grew at a slower pace of 3.4% in the first quarter of 2011-12 compared with 4.7% in the corresponding period of 2010-11. Banks lent R1.32 lakh crore to companies and individuals in the three months between March 25, 2011 and July 1, 2011, which is somewhat lower than the R1.51 lakh crore lent by banks in the corresponding period last year.

The growth in non-food credit, or the money that banks lend to companies and individuals, was up 19.47% year-on-year to R40, 06,719 crore in the fortnight ended July 1, 2011, compared with an increase of 20.3% year-on-year in the fortnight ended June 17, 2011. The RBI has projected the growth in non-food credit for the current year at 19% a tad lower than the 20% set for 2010-11.

However, banks have lent a large amount of R82,526 crore in the fortnight ended July 1, higher than the R17,754 crore that they lent in the previous fortnight ended June 17, 2011.

?The high incremental loan growth was due to a build-up at the end of the quarter,? points out KR Kamath, CMD, Punjab National Bank who says the 19.5% growth has come in line with expectations and cannot be called a slowdown yet. PNB is hoping to grow its loan book by 20-22% this year.

Adds HSU Kamath, CMD, Vijaya Bank, ?Some of the loans which were sanctioned earlier were disbursed during the end of the quarter, which is typical.? Kamath, however, cautions that there is some slowdown in disbursements to the industrial sector. ?Companies are not spending on new projects and could have an impact on credit off take but as of now a fair amount of credit has been sanctioned.?

Meanwhile, total deposits of the banking system, have increased by R2.84 lakh crore between March 25 and July 1, 2011 as against R1.4 lakh crore during the same period last year. With banks having upped deposit rates by at least 100-125 basis points over the last six months, deposits grew at a robust 18.37% to R54,88,682 crore, during the fortnight ended July 1, 2011.

Approximately R1.44 lakh crore worth of deposits were added during the fortnight to July 1, 2011, according to RBI data.

The RBI has been stressing the need for deposits to grow at a faster pace. In 2010-11 credit grew much faster than deposits causing some shortage of liquidity. There was a dip of R1,962 crore in the investment book of banks to R16, 03,425 crore.