RBI sees 14.23% growth in bank credit

The flow of bank credit during the 12-month period ended 29 November 2013 has been in line with the Reserve Bank of India's projections for the financial year ending 31 March 2014, provisional data released by the central bank on Wednesday showed.

Bank credit of scheduled commercial banks increased by 14.24 per cent year-on-year to Rs56,65,025 crore at the end of November 2013, from Rs49,58,790 crore as of 31 November 2012, according to RBI data.

Bank credit of all scheduled banks stood at Rs58,43,424 crore at the end of November 2013, up 14.23 per cent from the level of Rs51,15,248 crore at the end of November 2012.

Deposits with scheduled commercial banks stood at Rs74,77,928 crore at the end of November 2013, up 16.12 per cent from Rs64,40,028 crore at the end of November 2012.

Deposits with all scheduled banks rose 15.98 per cent to Rs76,82,676 crore as of end-November 2013, from Rs66,24,229 crore at the end of November 2012.

RBI has projected a 15 per cent growth in bank loans and a 14 per cent increase in deposits with banks during the current financial year ending in 31 March 2014.

Meanwhile, the RBI, in its monthly bulletin released on Wednesday, said loans and advances have been the most preferred instruments for financial transactions across sectors, followed by currency and deposits.

The share of government securities in total claims issued has generally increased reflecting preference for risk-free investment avenues apart from a substantial increase in the government's funding requirements.

On the other hand, the share of instruments of household financial saving, ie, small savings, life funds and provident and pension funds, has declined steadily.

The composition of aggregate financial claims indicates that over the years, the banking sector has generally been predominant, followed by the private corporate businesses, government, other financial institutions, households and then the rest of the world.

During 2011-12, the claims issued (as a ratio to net national income) by the private corporate business, banking and the government sectors were higher than their respective averages during 2003-04 to 2007-08, while those issued by the rest of the world, household and the other financial institutions were lower.

The resource gap of the private corporate businesses has been predominantly financed by the rest of the world (largely through FDI and portfolio inflows and external commercial borrowings), followed by the other financial institutions and banking sectors.

The banking and the other financial institutions continue to be the major providers of funds to the government sector in the recent period.

The financial surplus of the household sector has been largely channelised towards the banking sector, followed by the other financial institutions sector (which includes insurance, mutual funds and provident funds).

Household financing of the government sector has depleted over the years, largely reflecting the deflection from small savings.

The finance ratio, the financial inter-relations ratio and the new issues ratio have generally moved in tandem with the growth of the real economy.

The Indian economy rebounded strongly in 2009-10 and 2010-11 but lost momentum in 2011-12 on account of domestic and external factors. These factors impacted the sectoral and overall saving-investment gaps and the concomitant flow of funds across sectors, the release noted.

The overall resource gap (or the current account deficit), as ratio to GDP, remained steady during 2010-11 but then increased in 2011-12.

Underlying this was the widening of the resource gap of the public sector (after a one-off improvement in 2010-11) and the dwindling of the financial surplus of the household sector for the second consecutive year, even as the resource gap of the private corporate sector contracted after a temporary expansion in 2010-11.

In line with the trends in economic activity, total financial claims issued by all the sectors, as ratio to net national income, increased in 2010-11 but declined in the following year, even as it was placed somewhat above the average during 2003-04 to 2007-08.