Indian banks posted a fall in outstanding personal loans during the initial 3 weeks of May from the earlier month while investments increased, as per the data released by the Reserve Bank of India.
Loan growth decreased by 0.2%, or Rs7,423 crore, to Rs3,23,000 crore as of May 21 from the April end, while investment of banks’ in government bonds and other authorized securities increased by 1.42%, or Rs20,060 crore, to Rs14,44,000 crore.
But annual credit growth was quite strong at 18%, mainly because of a low base and in line with the RBI’s estimation of 20% credit growth for 2010-11.
Bank of Baroda chairman and MD, MD Mallya said, “This is the slack season and normally credit growth remains low during this time. Real credit growth pick-up will happen from the end of the second quarter. So the money comes back into the banking system and is re-deployed in investments.” He added, “I have not seen any credit growth till now in this [fiscal] year”.
Bank deposits also decreased in the initial 3 weeks in May over April-end by 0.7% to Rs 45,26,000 crore, but increased by 14.16% as compared to last year for the same period.
The RBI has estimated a deposit growth of 18% for the present fiscal.
SA Bhat, head, Indian Overseas Bank, said, “If advances get repaid, it makes logical sense to invest in bonds as one can get 7-8% return instead of putting in reverse repo and earning only 3.75%. Once credit picks up, we can sell these bonds and extend loans.”