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Banks face a growth dilemma

Cash-strapped public sector banks may be unnecessarily waiting for deposits to grow to start lending

Subhomoy Bhattacharjee 

Instead of declining deposits, is it shrinking credit that has pushed deposit creation southward in the Indian economy? The answer could determine how deep the central government may have to dig into its pocket to bail out state-run banks. Data from the past ten years for the Indian economy show this may indeed be the case.

Any increase in deposits has been preceded by a growth in credit. It happened during the boom of FY07 and FYO8, and again when the economy lost momentum in FY13 and FY14. So, is there a possibility that deposits would continue to be anaemic till credit turns around? ...

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First Published: Tue, August 02 2016. 21:15 IST