Banks credit, deposit growth sluggish, may pick up by March

A grocery shop owner counts rupees notes in Ahmedabad May 23, 2012.

MUMBAI (Reuters) - Indian banks' deposit advances and deposits continued their sluggish growth at the end of nine months of the financial year 2012-13 compared with a year earlier, but may show marginal improvement by March due to year-end loan demand from corporates, bankers said.

So far this fiscal, banks' advances grew 7.6 percent, compared with 10.4 percent a year earlier, while deposit growth was 7.1 percent compared with 10.8 percent in the same period a year earlier, data from the Reserve Bank of India showed on Wednesday.

"There should be some pick up in the last two months because of large working capital requirements of corporates and their unavailed limits on loans, we expect credit growth for all banks to be around 14 percent, and deposit growth around 10-12 percent" said M. Narendra, chairman and managing director, Indian Overseas Bank (IOBK.NS).

Last month, the RBI cut its key policy rate by 25 basis points and also lowered the banks' cash reserve ratio by a similar quantum to prop up growth that is set to fall to its slowest in a decade.

Following the RBI's rate cut, major state-owned rates banks have cut lending rates.

"After the RBI's rate cut, some banks have reduced lending rates, and this is generally the busy quarter so we expect improvement in credit growth," said a senior banking official with a state-owned bank.

As of January 25, banks' advances stood at 50,512.32 billion rupees, up 0.17 percent from two weeks ago, while deposits were down 0.18 percent at 65,271.17 billion rupees.

(Reporting by Neha Dasgupta; Editing by Anand Basu)