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Bank deposits fall first time since demonetization announcement, down 0.7% in Dec 23 fortnight

Following the massive surge in deposits after the demonetization announced on November 8, banks saw their aggregate deposits falling for the fortnight to December 23, according to the Reserve Bank data. For the fortnight to December 23, deposits collected by banks stood at Rs 10,516,237 crore, down by 0.7% compared to Rs 10,591,313 crore collected during the fortnight ended December 9, the RBI said on Thursday.

During the fortnight ending November 25, deposits at banks had soared to Rs 10,517,719 crore from Rs 10,114,803 crore on November 11. Banks were flushed with deposits after the government scrapped the old high currency notes worth Rs 20.51 trillion, constituting over 86% of the currency in circulation. The largest lender State Bank of India has collected an incremental net deposit of Rs 1.65 trillion between November 10 and December 30, which pushed up its Casa accounts by a whopping 478 bps, the bank chairman Arundhati Bhattacharya had said earlier this week. In the fortnight to December 23, bank credit as a whole grew marginally by 0.12% to Rs 73,48,058 crore as against Rs 73,39,116 crore in the fortnight ended December 9, RBI data showed.

This came after a massive fall in credit offtake throughout November. For the fortnight to November 25, bank credit fell by a hefty Rs 61,000 crore, or 0.8%. This plunge in bank credit came after another Rs 59,000-crore dip in the previous fortnight to November 11. But at the same time, the note ban also had a positive effect, as borrowers, including some default accounts, paid back as much as Rs 66,000 crore during the same period. In sharp contrast, during the same fortnight of November 23, banks got huge inflows as people deposited as much as Rs 4.03 trillion into their accounts, which as of December 9 crossed Rs 12 trillion. The outstanding credit of banking system stood at Rs 72.92 trillion as of November 25, according to the RBI data. The year-on-year credit growth was just 6.6%, down from 9.3% a year ago.