ATHENS (Reuters) - Greek bank deposits dropped for the fourth straight month in September, central bank data showed on Friday, as austerity-hit households run down bank accounts to pay higher taxes imposed under Greece's international bailout.
Deposits of businesses and households fell 0.5 percent from the previous month to 161.35 billion euros (137.57 billion pounds), the Bank of Greece data showed, bringing total net outflows since June to 1.79 billion euros.
As deposits shrink, tight credit amid the country's deepest postwar slump is sapping demand for loans.
Credit to the private sector shrank 3.9 percent year-on-year, the pace of contraction unchanged from August, the central bank said. Loans to the private sector have been contracting continuously for more than two years, aggravating Greece's economic crisis.
Greek banks lost around 90 billion euros or a third of their deposit base after Greece plunged into a debt crisis in late 2009, partly due to capital flight on fears of a euro zone exit.
About 17 billion euros returned to the banking system in the months following a June 2012 election, which led to the formation of a new government and eased fears that Athens would leave the common currency.
But inflows have dried up and partly reversed since March, when Cyprus was bailed out at the expense of bank deposit holders, stoking fears that something similar might happen in Greece.
Credit to businesses, a narrower measure in the data for the private sector, declined at an annual pace of 4.7 percent after a 4.5 percent drop in August.
Despite record low interest rates from the European Central Bank, Greek businesses' inflation-adjusted borrowing costs have hit an average 6.6 percent, their highest level since the country joined the euro area, government estimates show.
Loans to households and private non-profit institutions shrank 3.6 percent in September, Friday's data showed, the pace unchanged from the previous month.(Reporting by George Georgiopoulos and Harry Papachristou, Editing by Gareth Jones)