The growth in non-food credit has remained above 30 per cent year-on-year for more than a year, while time deposits have recorded large accretion thus far.  "This partly reflects higher interest rates as well as availability of tax benefits under Section 80 C," the apex bank stated in its mid-term review.

Broad money growth accelerated to 19 per cent YoY as on October 13, from 16.8 per cent a year ago and remained above the indicative trajectory of 15 per cent projected in the RBI's annual policy statement.

On a fiscal year basis, broad money (M3) growth at 7.8 per cent was higher than the 6.1 per cent in the corresponding period of last fiscal.

Demand for bank credit from the commercial sector continued to remain strong during Q2 FY 07 with non-food credit of SCBs increasing by 9.8 per cent up to October 13 as against 11 per cent during the corresponding period of last fiscal.

On a YoY basis, non-food credit grew 30.5 per cent as on October 13. "Reflecting this, the incremental credit-deposit ratio of SCBs has remained high though it has exhibited some moderation in recent months," the RBI stated.

However, as banks liquidated their investments in gilts in H2 FY 06, growth in their holdings of government securities at 2.5 per cent YoY as on October 13 this year was lower than that of 5.9 per cent a year ago.

This growth is significantly lower than the average growth of around 20 per cent per annum during the 2002-05 period, the apex bank said.

Banks' holding of government securities was 29.8 per cent of their NDTL as on October 13, as compared with 31.3 per cent in FY 06 and 34.7 per cent a year ago.

Excess SLR investments of SCBs were Rs 1,23,010 crore (Rs 1230 billion) as on October 13 as compared with Rs 2,07,903 crore (Rs 2079.03 billion) a year ago.

"Raising funds through equity issuances in the primary market as well as internal reserves also helped banks to fund strong credit demand," the RBI said, adding that banks curtailed their overseas foreign currency borrowings, while increasing their investments abroad in contrast to the trends of the previous year.

However, as banks liquidated their investments in gilts in H2 FY 06, growth in their holdings of government securities at 2.5 per cent YoY as on October 13 this year was lower than that of 5.9 per cent a year ago.

This growth is significantly lower than the average growth of around 20 per cent per annum during the 2002-05 period, the apex bank said.

Banks' holding of government securities was 29.8 per cent of their NDTL as on October 13, as compared with 31.3 per cent in FY 06 and 34.7 per cent a year ago. Excess SLR investments of SCBs were Rs 1,23,010 crore as on October 13 as compared with Rs 2,07,903-crore a year ago.

"Raising funds through equity issuances in the primary market as well as internal reserves also helped banks to fund strong credit demand," the RBI said, adding that banks curtailed their overseas foreign currency borrowings, while increasing their investments abroad in contrast to the trends of the previous year.