Credit is likely to rise at a faster with growth in economy:RBI

Mumbai: Credit offtake from banks grew by 20.1 per cent to over Rs 42 lakh crore during the one-year period ended July 1,2011,indicating an upswing in industrial activity.

According to data from the Reserve Bank, credit offtake during the period stood at Rs 42.09 lakh crore against Rs 35.04 lakh crore in the same period of the previous year.

Meanwhile, deposits went up to over Rs 56.40 lakh crore till beginning of July this year against Rs 47.81 lakh crore as on July 2, 2010. This is a rise of almost 18 per cent on an annual basis.

In the annual monetary policy 2011-12 announced in May,the RBI had said that credit is likely to rise at a faster

pace because of the economy's growth momentum.” Sustained growth momentum could continue to exert pressure on interest rates through high demand for credit,”it had said.

The RBI had projected credit growth to be 19 per cent this fiscal, while deposit growth has been pegged at 17 per cent.

During 2010-11,bank credit had increased by 21.5 per cent, while deposits grew by only 15.5 per cent.

In December last year, the apex bank had expressed concern over the widening ratio between the credit and deposit rates of banks. Toward the end of the last fiscal, however,the gap in the credit-deposit ratio stood reduced.

Source: Financial Express