The banking sector has shown a rise in net interest income (NII) owing to a surge in credit off take.

Major banks like SBI, HDFC Bank, PNB and others have shown a decent rise in their NII on a year- on -year basis. The year-on-year NII for the fourth quarter of the last fiscal which ended on 31st March 2010 has been 39% for State Bank of India, 27% for HDFC Bank, 26% for Punjab National Bank and 41% for Axis Bank respectively.

"Credit growth has started picking up and that is helping NII. More growth is expected in FY11," said Vaibhav Agrawal, vice president - research, Angel Broking.

The credit of take of banking sector showed a rise above RBI's target of 16% to reach 16.5% in the last fiscal. This amounted to Rs. 33.32 lakh crores of loan disbursal.

The projection set by RBI for this fiscal has been 20%.

The rise in NII has been better for the public sector banks than the private sector ones."This is because PSBs have recovered from their loss to their margins in the past," said Hatim Brochwala, banking analyst, Khandwala Securities.

"PSBs have a better presence in rural areas due to which they are able to do priority-sector lending at reasonable rates, which fetches them good yields. Also, these banks do not follow the practice of lending at very low rates, which may be the case with private banks," said BN Dewan, general manager (credit), Indian Bank.

Growth, however, has not been positive for all banks. This includes the largest private sector bank of the country, ICICI Bank which has booked a decline in NII by 5% in Q4.