The growth rates of deposits and loans are diverging and this could exert pressure on lending rates if the demand for loans remains strong. Deposits have slowed as inflation eats into savings.
Six weeks into the new fiscal year, banks are yet to see any perceptible pickup in business. Both loans and deposits are declining when compared with the figures at the end of the previous fiscal when lenders indulged in 'window-dressing' of books to meet targets. While loans dipped by Rs 45,484 core, deposits were down by Rs 36,741 crore between April 6 and May 18.
Total loans outstanding of the banking system was at Rs 46.48 lakh crore as on May 18, while total deposits were at Rs 60.58 lakh crore. The annual year-on-year growth works out to 14% for deposits, two percentage points below the RBI forecast, and 17% for loans, in line with the RBI projections.
Banks often do not push for business in the months of April and May since most of them are busy closing the account books of the previous year.
Hence, the business figures one sees in this period often tend to reflect the impact of window-dressing, which wanes over a period of time.
It might be too early to detect any trend for the year with the figures available so far, but loan demand is often sluggish whenever there is a slowdown in the economy.
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