MUMBAI (Reuters) - Indian banks' investments in safe haven government securities continued to outpace loan growth, data for the two weeks to February 10 showed, as credit demand remained slack in a slowing economy.
According to Reserve Bank of India data, banks' investments in government bonds rose 2.2 percent to 17.3 trillion rupees in the two weeks ending February 10, while loan demand was up just 0.71 percent to 43.8 trillion rupees.
Deposits grew 0.56 percent during the reporting period to 58 trillion rupees.
Loan growth was 15.7 percent on year in the two weeks to February 10, slightly below the central bank's downward revised projection of 16 percent for full fiscal year 2011/12 that ends in March.
The RBI lowered its projection for loan growth downwards from 18 percent at its January policy review. It then said that the deceleration in credit growth was due to banks' large investments in debt following large market borrowings by the government.
New Delhi has already raised its overall borrowing target twice to 5.10 trillion rupees in the current fiscal year due to a widening fiscal deficit.
The economy is expected to grow 7.1 percent in the current fiscal year, its slowest annual growth in three years, a government advisory panel said on Wednesday.
Deposits grew around 15 percent on-year in the two weeks to February 10, while investments in government securities rose 17.6 percent, the RBI data showed.
(Reporting by Suvashree Dey Choudhury; Editing by Subhadip Sircar)
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