The State Bank of India (SBI) has unveiled expectations of substantial growth in both deposits and credit for the fiscal year 2025. SBI forecasted deposits to grow at a rate of 14.5 per cent-15 per cent and credit to expand between 16.0 per cent-16.5 per cent in FY25, anticipating a surge in economic activity, in a report released on Tuesday.
RBI’s Monetary Policy Committee (MPC) meeting is scheduled from April 3-April 5.
This outlook comes amidst a backdrop of sustained momentum in credit growth, particularly across agriculture, MSME, and services sectors, as revealed by the latest credit growth numbers.
On the banking front, while deposit growth has rebounded, the sustained momentum in credit growth has led to a widening gap between deposits and credit growth.
Data as of March 8 indicates that All Scheduled Commercial Banks’ (ASCBs) credit grew by an impressive 20.41 per cent, up from 15.7 per cent the previous year, while deposits increased by 13.7 per cent, compared to 10.3 per cent in the preceding year.
India’s robust economic performance has also attracted foreign investment inflows, surpassing other Asian markets in March.
Despite geopolitical tensions and concerns over the continuity of a higher interest rate regime, India has emerged as a magnet for foreign funds, defying market expectations.
However, amidst these positive indicators, India stands out as a notable exception in the global economic landscape.
While strong evidence suggests that emerging economy central bank rate actions are typically influenced by advanced economy central bank rate actions, India’s monetary policy trajectory diverges from this trend.
In the United States, structural shifts in the labour market are evident, with the coexistence of low unemployment rates alongside elevated job vacancy rates.
Inflationary pressures, primarily driven by food price dynamics, present additional challenges in the US markets.
Looking ahead, SBI anticipates that the Reserve Bank of India (RBI) might initiate a rate cut cycle in the third quarter of FY25.
However, unlike in other emerging economies where rate cut cycles may be influenced by advanced economy central bank actions, India’s rate cut cycle is expected to be shallow, reflecting the unique economic conditions prevailing in the country.
As stakeholders prepare for the evolving economic landscape, SBI’s projections provide valuable insights into the trajectory of India’s banking sector and monetary policy decisions.
With expectations of robust growth in deposits and credit, coupled with potential rate cuts on the horizon, India remains poised for continued economic resilience and growth in the coming fiscal year.
