Credit and deposit grow at 11.5% in fortnight ending Dec 13: RBI data

Credit growth gained pace in the fortnight ending December 13 over the previous fortnight, latest data by Reserve Bank of India (RBI) showed. While credit growth stood at 11.5 per cent year-on-year (Y-o-Y), deposits grew in tandem, posting a growth of 11.5 per cent Y-o-Y during the fortnight ended December 13.

 

Data shows that outstanding deposits in the fortnight ending December 13 stood at Rs 227.61 trillion, while outstanding credit stood at Rs 180.81trillion. In the previous fortnight ending (November 15), while deposits stood at Rs 213.13 trillion, growing at 10.7 per cent Y-o-Y, outstanding credit stood at Rs 168.37 trillion, growing at 10.6 per cent Y-o-Y.

 

 

Excluding the impact of the merger of HDFC Ltd. into HDFC Bank, credit in the economy has grown by 12.7 per cent Y-o-Y, far outpacing deposits, which have grown by 11.9 per cent. HDFC Ltd. merged into HDFC Bank on July 1, 2023. 

 

Credit growth in the economy, which had previously been driven primarily by retail credit, has tapered off from its peak. In November of last year, the RBI raised the risk weights on unsecured loans and loans to NBFCs. Furthermore, with emerging stress in unsecured segments such as credit cards, personal loans, and microfinance, most lenders have scaled back their credit growth targets for the current financial year (FY25). Additionally, persistently high interest rates, a consequence of elevated inflation, are also putting pressure on corporate credit growth.

 

Further, the fact that HDFC Bank, country’s largest private sector bank, is growing its loan book below the industry average is also weighing on the overall credit growth in the economy. 

 

“In response to the Reserve Bank’s November 2023 macro prudential measures to contain potentially excessive risk build-up from high credit growth in unsecured retail segments, there has been some moderation in credit growth, but delinquency levels and leverage warrant enhanced vigil,” RBI said in its Trend and Progress report.

 

Overall credit growth has also slowed from 16 per cent last year to around 11 per cent now.

 

According to India Ratings, a revival in the private capex could partially offset additional pressure on the overall credit growth in FY25, even as growth in the agriculture segment is likely to remain largely stable mainly due to the normal monsoon.

 

Meanwhile, there has been a scramble for deposits by banks as household savings has been increasingly moving towards other investment avenues such as equity markets, mutual funds, pension funds, insurance, and others.

 

Credit growth was exceeding deposit growth until a few months ago. It was in the fortnight ending October 18 that, after 30 months, deposit growth outpaced credit growth as credit growth had come off its peaks from last year.

 

RBI recently cut the Cash Reserve Ratio (CRR) for banks by 50 basis points (bps), which has been estimated to infuse liquidity of Rs 1.16 trillion into the banking system. According to India Ratings, while system liquidity is likely to continue to be in deficit in December 2024, the recent CRR cut by the RBI should provide some relief. Deposit rates are unlikely to show a material decline as the busy credit season lies ahead.