Bank credit growth has shown little signs of a slowdown in the first seven weeks of the current financial year. The credit extended by Indian banking sector rose 25.3 per cent at end of May 23 with the outstanding credit estimated at Rs 23,64,417 crore.

The latest Reserve Bank of India data showed that banks disbursed advances worth Rs 15,923 crore between April 1 and May 23, compared with a decline of Rs 47,469 crore during the corresponding period last year.

With the elevated prices of food items and commodities including crude oil, inflation measured by wholesale price index grew 8.24 per cent during the week ended May 24, 2008. The recent fuel price hike is expected to take inflation near 9 per cent, if not higher.

Higher inflation and a near constant credit growth rate � despite the RBI's plan to lower it to around 20 per cent � has raised fresh fears of tighter monetary stance. During the first seven weeks of 2007-08, credit growth had seen a 26.1 per cent rise.

During the current financial year, the RBI has raised the cash reserve ratio or the share of deposits that banks have to maintain with the central bank by 75 basis points.

However, banks have so far kept lending rates unchanged given the liquidity conditions. State Bank of India [Get Quote], the country's largest lender, has, however, raised term deposit rates by 25-75 basis points.

In the first seven weeks of financial year, deposits grew 23.2 per cent year-on-year with outstandings on May 23 estimated at Rs 32,35,532 crore. Between April and the third week of May, deposits with the banking system rose by Rs 43,000 crore compared with a drop of Rs 1,363 crore in the corresponding period last year.

The credit to deposit ratio was 73.08 and the investment to deposit ratio was 31.53 per cent, indicating embedded liquidity in the banking sector.

Meanwhile, Indian foreign exchange reserves declined by $1.55 billion to $314.61 billion as on May 30. The forex reserves have grown by just $4.9 billion since March 2008.