The scheduled commercial banks (SCBs) remained largely robust even though there was a slowdown in the rate of growth of deposits in 2008-09 on the backdrop of global financial crisis.

The growth in deposits decelerated to 22.4 per cent as at end-March 2009 from 23.1 per cent as at end March 2008. Among non-deposit resources, the growth in borrowings by banks decelerated to 6.8 per cent as at end-March 2009 from 24.5 per cent in the previous year.

“The growth rate of credit of SCBs, which was as high as 33.2 per cent in 2004-05 has been witnessing a slowdown since then,” the Reserve Bank of India stated in its Report on Trend and Progress of Banking in India 2008-09, which was released here on Thursday. In continuation of the trend, the growth rate in bank credit decelerated to 21.2 per cent in 2008-09 from 25 per cent in the previous year. Apart from cyclical factors which led to slowdown in growth after a period of high credit growth, “the deceleration in bank credit growth was accentuated this year due to the overall slowdown in the economy in the aftermath of global financial turmoil.”


The RBI stated that the growth rate of investments by banks also decelerated to 23.1 per cent in 2008-09. However SLR securities as percentage of Net Demand and Time Liability increased during the year due to banks’ preference to park their funds in low risk and low return instruments against the backdrop of prevailing uncertainties.

The off-balance sheet operations (OBS) of the SCBs, which include forward exchange contracts, guarantees, among others, have increased manifold in the recent years. The year 2008-09 however, marked an exception to this trend with SCBs reducing their OBS exposures by 26.4 per cent as compared to last year. The growth rates of income as well as expenditure of SCBs decelerated, leading to deceleration in growth of net profits from 36.9 per cent in 2007-08 to 23.5 per cent in 2008-09.

However, the Return on Assets (ROA) remained at last year’s level of one per cent. Significantly, the Return on Equity (ROE) increased to 13.3 per cent in 2008-09 from 12.5 per cent in 2007-08, indicating increased efficiency with which capital is used by the banks. Thus, though the expansion of the balance sheet moderated, the asset quality was maintained.

The capital to risk-weighted assets ratio (CRAR) of SCBs improved to 13.2 per cent as at end-March 2009 from 13 per cent as at end-March 2008.

Non-performing assets

The gross NPA to gross advances ratio of SCBs remained at the last year’s level of 2.3 per cent as at end-March 2009.

The gross NPA ratio of public sector banks declined but that of private and foreign banks increased during the year.

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