Banks' deposits grow faster, lending slackens

Deposits with scheduled commercial banks in the country grew at a faster pace helped by high rates while growth of lending was slower as high rates deterred borrowers.

Deposits with banks for the period 31 March to 10 August 2012 increased 2.8 per cent to Rs62,80,000 crore, while loans grew 0.4 per cent to Rs47,0,000 crore, figures released by the Reserve Bank of India (RBI) showed.

The growth in deposits during the current financial year, beginning 1 April 2012, was aided by the high interest rates, possibly among the highest in the world, while the high lending rates hurt, deterring borrowers to postpone their plans.

Also, banks in India offer the highest returns on money invested, and more securely, too.

In the fortnight ended 10 August, deposits with banks rose 0.6 per cent while credit flows grew 0.4 per cent.

Banks in India are caught in a vicious circle of high deposit rates and high lending rates, each feeding the other. Also, state-run banks have to follow government prescription in lending to various consumer groups.