Bank credit offtake up 23.3%, deposits up over 16%: RBI

Credit offtake from public and private sector banks in the country grew by over 23.3% for the one-year period ended February 25, indicating an upswing in the industrial activity, says the RBI.

According to the apex bank, for the one-year period ended February 25, credit offtake stood at Rs 39.26 lakh crore as against Rs 31.83 lakh crore a year ago.

During the period, deposits rose to Rs 52.29 lakh crore from Rs 45.07 lakh crore as on February 26, 2010, the latest data from the Reserve Bank revealed. This is a rise of over 16% on an annual basis.

RBI, in its annual monetary policy at the beginning of the fiscal, had estimated credit offtake to grow by 20% this fiscal. However, in December 2010 the apex bank expressed concern over the widening ratio between the credit and deposit rates of banks.

This has the potential to affect the supply of liquidity in the system due to higher lending by the banks vis-a-vis lower deposits. In its recent third quarterly monetary policy review, RBI had noted that the deposit growth moderated during 2010.

Several banks raised their deposit rates after the Second Quarter Review of 2010-11, which led to a larger deposit mobilisation in December.
Consequently, deposit growth increased to 16.5% by end-December 2010, close to the indicative projection of 17% for the current financial year.

However, annual non-food credit growth has been above the Reserve Bank's indicative projection of 20% since early October 2010, rising to 24% by end-December 2010, the RBI said. The wide gap between credit growth and deposit growth resulted in a sharp increase in the incremental non-food credit-deposit ratio to 102% by end-December 2010, up from 58% in the corresponding period of previous year, it added.

During the past few months, credit offtake has grown at the rate of 20% on average. Credit offtake has been higher this fiscal on account of large borrowings by telecom firms to pay for 3G spectrum licences.

The government realised over Rs 1 lakh crore from the sale of spectrum of high speed mobile and broadband wireless services, much higher than the Budget estimate of Rs 35,000 crore.

Credit rating agencies like Crisil had earlier said the country was likely to see credit offtake growth at the rate of around 20-22% this fiscal.