High inflation has slowed down the pace of deposit growth for the banking sector which has fallen short of Reserve Bank estimates of 17 per cent,aggravating the liquidity position in the system.
While the deposits in the banking system grew only by 13.4 per cent during the one-year period ending March 23,2012,the lending to commercial sector rose by over 17 per cent,according to data by RBI.
The deposit growth at 13.4 per cent fell short of the 17 per cent projected by the RBI,mainly because high inflation eroded the capacity of people to save.
“Why deposit growth fell short as per the RBI projection is because of rising inflation that affected savings accounts on deposit in almost all banks,” M Narendra,Chairman and Managing Director,Indian Overseas Bank said.
According to the latest data released by the RBI,deposits with commercial banks grew at 13.4 per cent to Rs 60.72 lakh crore as on March 23,2012 from Rs 53.55 lakh crore on March 25,2011.
However,the RBI in its annual monetary policy statement for 2011-12,had projected an aggregate deposits of scheduled commercial banks (SCBs) to grow at 17 per cent.
“Another reason is that slow pace of economy growth also impacted the deposit numbers as foreign direct investments are on the rise…Expecting some good returns,people invested more in gold,real estate and mutual funds than their savings accounts in the banks concerned,” Narendra added.
When asked about any improvement of deposit growth in banks in future,a public sector bank executive said,”We need to control the price rise — especially the food prices. I think the liquidity will improve in future if the inflation is eased to some extent at a comfort level,” he added.
Earlier,the RBI had said that inflation would moderate as projected,despite the significant depreciation of the rupee.
“Consistent with the central bank’s earlier projections,inflation is likely to decelerate further to 7 per cent by March 2012,” RBI had said.
Similarly,the data further showed that bank loans also increased by over 17 per cent to Rs 47.54 lakh crore as on March 23,against Rs 40.60 lakh crore on March 25 last year.
“Credit towards food was higher at Rs 81,303.89 crore as on March 23,2012 against Rs 64,282.84 crore on March 25 last year,” the data revealed.
RBI is scheduled to come out with annual monetary policy for the current fiscal on April 17.