Bank credit grows 17.2% YoY to Rs 129.48 trn in fortnight to Nov 18

Deposit growth rises 9.6%, analysts cite FPI flows, govt spending

Bank credit grew by 17.2 per cent year-on-year to Rs 129.48 trillion as on November 18, 2022, reflecting firm demand for loans, latest Reserve Bank of India data showed.

The credit growth was slightly higher than 17 per cent as on November 4.

Deposit growth was up 9.6 per cent YoY to Rs 172.95 trillion as on November 18, a significant rise from 8.2 per cent a fortnight ago, the RBI data showed.

The wide gap between deposits and credit has exerted pressure on banks to mobilise funds to finance aggressive loan growth. Over the past few months, banks have raised deposit rates in order to garner fresh funds, and have also resumed large-scale issuances of bonds over the last couple of weeks in order to raise capital.

Credit growth has, however, moderated from around 18 per cent in early October.

Analysts cited strong overseas investment and a likely rise in the pace of government spending as key reasons behind the improvement in deposit growth in the fortnight ended November 18.

“The key reason for this deposit growth is basically improvement in the balance of payments account. The FPI flows seen in the month of November have improved significantly compared to the previous month,” Soumyajit Niyogi, director, India Ratings & Research said.

“That has resulted in the rise in deposit growth which is again getting reflected in the banking system liquidity as well. I believe that government spending has also been a key factor,” he said.

Foreign portfolio investors purchased Indian equities worth $4.4 billion in November, snapping a two-month selling spree, NSDL data showed.

Liquidity conditions in the banking system turned more comfortable in November as compared to the previous month, with the RBI absorbing a large quantum of surplus funds from banks on several occasions.  The surplus liquidity has, however, reduced sharply from around Rs 8 trillion in early April to around Rs 1.4 trillion in October.