May 30, 2012 / 1:01 PM / 5 years ago

Indian bank business shrinks, says RBI

A labourer works on the sign of a bank building in Ahmedabad November 26, 2010.Amit Dave/Files

MUMBAI (Reuters) - Deposits and advances with Indian banks have shrunk so far in the fiscal year that began in April, with sluggish economic growth crimping loan demand, the Reserve Bank of India said on Wednesday.

Banks typically see a sharp fall in business growth in the first couple of months of a new fiscal year as new projects tend to gather steam in the latter half of the year.

Banks saw a net withdrawal of funds, with deposits falling by 367.5 billion rupees to 60.8 trillion rupees as of May 18 from April 6, while advances fell 454.9 billion rupees to 46.5 trillion rupees, the central bank release showed.

"There is a slowdown in new projects, because companies are adopting a wait-and-watch mode. But there is no slowdown in the retail segment and in the demand for working capital loans from companies," a senior official from a state-run bank said.

In the absence of strong demand for loans, banks invested in government bonds, with such investments rising 0.7 percent to 18.25 trillion rupees during the period.

On a year-on-year basis, deposits were up 13.8 percent, and advances grew 17.4 percent.

Reporting by Shamik Paul; editing by Malini Menon

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