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August 31, 2002 | 1342 IST
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Signs of recovery in credit offtake

BS Banking Bureau in Mumbai

The fund-flushed banking system saw a faint sign of recovery in credit offtake in the last quarter of fiscal 2002.

The RBI report points out that credit to the commercial sector went up by Rs 33,676 crore (Rs 336.76 billion) in the period. Bank credit to the commercial sector has continued to rise in this fiscal as well, showing a growth of 19.1 per cent till August 9, 2002, as compared with 13.8 per cent in the corresponding period last year.

The sharp increase in bank credit to the commercial sector during the current fiscal reflects the accounting effect of the impact of mergers since May 3 on the assets and liabilities of the banking system, the RBI annual report said.

"This (credit pick-up) is indicative of congenial conditions for a recovery in industrial output," remarked the central bank.

However, it also noted that this was accompanied by a slowdown in investments in government securities.

As the monetary conditions eased further, incipient signs of recovery in credit demand were visible, stated the RBI. The momentum of aggregate deposit growth decreased somewhat during the third quarter of 2001-02, but picked up once again in the fourth quarter.

Growth in deposits has declined since the beginning of this fiscal, as aggregate deposits increased by 13.8 per cent till August 9, 2002, as compared to a growth rate of 16.2 per cent during the corresponding period last year. Net bank credit to the government slowed down to 14.4 per cent at Rs 81,043 crore (Rs 810.43 billion) as compared with 16.3 per cent last year.

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