Indian banks' business barely grows in July-September

MUMBAI, Oct 3 (Reuters) - Indian banks' business barely grew in the second quarter of the fiscal year that started in April as weak sentiment in a slowing economy curbed the appetite for credit and lenders were wary of large deposits.

Banks' advances grew 0.1 percent in the July-September period to 47,664.89 billion rupees ($913 billion), lower than the 1.4 percent growth in the previous quarter, data from the Reserve Bank of India showed on Wednesday.

Deposits grew 1 percent during the three months to 62,908.74 billion rupees, compared with a growth of 2.2 percent in the previous quarter.

Typically banks' business grows at a faster pace in the second quarter compared with the first, but prolonged government inaction and subdued economic activity led to lower demand for credit in the July-September period, bankers said.

"It is the impact of the slowdown. When economic growth is slowing down, definitely there will be an impact on credit growth," said B. A. Prabhakar, chairman and managing director of the state-run Andhra Bank .

India's economy languished near its slowest in three years in the April-June period, growing 5.5 percent, just above the 5.3 percent growth in the three-months ended March.

Banks' advances grew 1.6 percent in the April-September period, while deposits grew 3.2 percent.

Bankers said business is likely to improve in the October-March period, aided by higher demand for credit in the festival season, a pick-up in the monsoon that will boost the winter harvest and recent reform measures announced by the government.

"Things have improved after the government took initiatives and showed it is committed to reforms. The perception has changed," said M. Narendra, chairman and managing director of the Indian Overseas Bank .

However, the positive impact of the reform measures would be felt with a lag, the lenders said.

After months of dithering on the economy, India's beleaguered government roared back to life in a dramatic fashion in mid-September, announcing big bang reforms aimed at reviving growth and staving off a ratings downgrade.

(Reporting by Shamik Paul; Editing by Anupama Dwivedi)

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