Indian banks' loan growth gathers pace, may meet RBI projection

A man walks past a logo of the Reserve Bank of India in front of its building in Kolkata May 21, 2012.

MUMBAI (Reuters) - Indian banks have seen a pick-up in demand for credit since the beginning of the festive season in October, and are confident of meeting the central bank's projection for the fiscal year ending in March 2013.

Bank loans have grown 4.3 percent as of November 16 since the beginning of the fiscal year in April, compared with a growth of 1.6 percent in the first six months of 2012/13, RBI data showed. Credit grew 5.9 percent in the same period in the previous year.

"There is some growth visible. Demand for auto loans and home loans increased during the festive season," said a senior official of a state-run bank.

"In the corporate sector, new projects are still slow, but we will be able to meet the RBI's projection," he said.

At its second-quarter review of the monetary policy, the Reserve Bank of India cut its credit and deposit growth projection by 1 percentage points each to 16 percent and 15 percent respectively.

Demand for credit was slow in the first half of the fiscal year as companies held back investments in new projects, and the slow economic growth dampened demand for credit.

Loan growth generally picks up in the second part of the fiscal year, aided by increase in demand for credit from companies which typically borrow more in the second half. Demand for retail loans also sees a spurt in the festive season beginning from October.

As of November 16, banks' credit stood at 48,945.22 billion rupees, up from 46,935.66 billion rupees at the beginning of April.

Banks' deposits grew 5.2 percent during the period to 64,100.31 billion rupees, higher than a growth of 3.2 percent in the first six months of the fiscal.

Bankers said credit growth is likely to improve over the next two months.

(Reporting by Shamik Paul; Editing by Prateek Chatterjee)