Dampened investor sentiment caused Indian banks to experience almost stagnant credit growth in the first five months of the fiscal year starting April.
Banks' loans grew 0.6 per cent as of Aug. 24 since the beginning of April, while deposits were up 3.2 percent, data from the Reserve Bank of India showed on Wednesday.
The central bank forecast a credit growth of 17 per cent and deposit growth of 16 per cent for the full fiscal ending in March 2013.
Bankers attribute this to policy inaction and bureaucracy that held up major infrastructure projects.
"The infrastructure sector absorbs a large chunk of bank credit, but it has been facing various issues like not getting clearances from the government, which has hampered credit growth," said a senior official of a state-run bank.
While pick-up in credit is expected in the October-March period, bankers said they could fall short of the RBI forecast.
As of Aug. 24, banks' credit stood at 47,217.92 billion rupees, marginally lower than 47,234.58 billion rupees two weeks ago, while deposits were at 62,916.99 billion rupees, up 0.1 per cent.
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