Indian bank business shrinking in this fiscal, says RBI

Deposits and advances with Indian banks have shrunk so far in the fiscal year that began in April, with sluggish economic growth crimping loan demand, the Reserve Bank of India said on Wednesday.

Banks typically see a sharp fall in business growth in the first couple of months of a new fiscal year as new projects tend to gather steam in the latter half of the year.

Banks saw a net withdrawal of funds, with deposits falling by Rs 36750 crore to Rs 6080000 crore as of May 18 from April 6, while advances fell Rs 45490 crore to Rs 4650000 crore, the central bank release showed.

"There is a slowdown in new projects, because companies are adopting a wait-and-watch mode. But there is no slowdown in the retail segment and in the demand for working capital loans from companies," a senior official from a state-run bank said.

In the absence of strong demand for loans, banks invested in government bonds, with such investments rising 0.7% to Rs 1825000 crore during the period.

On a year-on-year basis, deposits were up 13.8%, and advances grew 17.4%.