The Reserve Bank of India (RBI) said on Thursday that the flow of credit from scheduled commercial banks has increased between April and June 20 this year. The credit flow has increased by 25.4% during this period. The growth is slower than the corresponding period of last year.

The rise in credit is due to high demand from public sector oil firms. The oil firms are under-recovery due to subsidy on oil products. They are forced to sell petroleum products at the rate below the prevailing global rates.

The international prices of crude oil are increasing day by day. The rates have touched $146 a barrel on Thursday. The price rise of crude oil will further lead to increase demand of funds by oil companies to deal with more losses. The union government will not increase the prices of petroleum products further. So the oil companies will have to be dependent on banks for funds. It will further increase bank credit.

The growth in accretion of deposits was too higher than the RBI target of 17% per cent. The deposits of commercial banks has increased to Rs3354109 crore as compared to Rs2750356 crore previous year between April and June 2007. These deposits includes demand deposits (those with a tenure of less than a year) and term-deposits.