Efforts by banks to bolster their deposit bases appear to be yielding results, as evidenced by the robust incremental deposit growth observed in fiscal year 2025. Data from the Reserve Bank of India (RBI) indicates that between March 22 and May 3, deposit growth surged nearly twice as fast as credit growth. During this period, bank deposits swelled by 2.1% to reach Rs 209.4 trillion, while credit expanded by 1.2% to Rs 166 trillion.
The surge in deposit growth comes amidst intense competition among lenders to attract funds. In response to slower deposit growth in the previous fiscal year, several banks raised deposit rates to entice depositors. Recently, the State Bank of India (SBI) elevated interest rates on fixed deposits with maturities of less than one year.
Focus on deposits
Analysts suggest that banks have redirected their focus towards augmenting deposits in the fourth quarter, resulting in accelerated deposit growth. This trend is expected to persist into fiscal year 2025, as banks aim to maintain a balanced credit-deposit ratio, as advised by regulators.
With credit demand remaining robust across most banks, there is a pressing need to mobilize deposits to sustain this growth trajectory. This emphasis on deposit accumulation has intensified following concerns expressed by the central bank regarding high credit-deposit ratios at certain banks.
Analysts anticipate a deposit growth of around 13-14% year-on-year (YoY), while credit growth is expected to hover around 12-13% YoY in fiscal year 2025. In the previous fiscal year, credit growth outpaced deposit growth significantly, driven by strong demand for loans. Credit off-take surged by 20.2% YoY to Rs 164.3 trillion (including the merger of HDFC twins), while deposits increased by 13.5% YoY to Rs 204.8 trillion for the fortnight ended March 22.
