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Journalism of Courage
Non-food credit or the money that banks lend to companies and individuals,rose 23% y-o-y to Rs 36,55,933 crore for the fortnight ended January 14 ,2011. This was 100 basis points lower than the year-on-year increase seen in the fortnight ended December 31,2010. Moreover,although banks lent an incremental Rs 1,19,920 crore during the fortnight ended January 14,2011,the credit offtake has been lower by Rs 41,332 crore compared with the previous fortnight.
The central bank said after its monetary policy announcement earlier this week that it would like credit growth to moderate to its projected levels of 20% for 2010-11. Several banks today have an incremental credit-deposit ratio of over 80%. The central bank now seems a tad concerned that gap between credit growth,currently running at around 24% and the growth in deposits at a somewhat sluggish 16% has exacerbated the liquidity situation. It is important that credit growth moderates to conform broadly to the indicative projections, the governor noted addng that this would prevent any further build-up of demand side pressures. Reserve Bank of India governor Duvvuri Subbarao went so far as to say that the RBI would be watching the situation and would engage with banks that demonstrated creditdeposit ratios which were out of line.
Meanwhile,deposit growth,which has been rather sluggish so far in 2010-11 showed some signs of revival with the y-o-y deposit growth at 16.4% in the fortnight ended in Jan 14 2011. This is probably the result of banks having upped deposit rates over the past couple of months; most banks have attempted to woo savers with an increase in term deposit rates of at least 50 basis points while at the upped end they have offered as much as 125 basis points.
