According to the latest figure released by the central bank in India, the total bank loans grew 1.2 per cent as of September 7 since the beginning of the current financial year on 1 April, 2012.

Experts say that the increase in loans is due to a cut in interest rates by banks for vehicle and home loans in the country. Loans from banks had risen 0.6 per cent from the beginning of April to August 24, according to the data released earlier.

The data by the Reserve Bank of India (RBI) also showed that the deposits rose 3.7 per cent during the period. The central bank had cut its cash reserve ratio by 25 basis points and as a result injected a further Rs. 17,000 crore into the banking system.

It is believed that the cut in the ratio will boost growth in loans in the country and the growth rate is expected to accelerate. Experts say that rate cuts by the central bank will allow commercial banks in the country to offer loans at reduced interest charges to the customers.

The country's largest lender, State Bank of India has already announced a cut in its basic lending rate by basis points to 9.75 per cent from Thursday and more banks might follow soon.