Credit offtake continued to grow at 19.2% year-on-year (y-o-y) to reach Rs 167.1 lakh crore, for the fortnight ending June 14, 2024. This rise can continue to be attributed to the impact of HDFC’s merger with HDFC Bank along with the growth in personal loans. Excluding the impact of the merger, credit grew at 15.6% y-o-y for the fortnight, which is mostly in line with last year’s growth of 15.4%. Sequentially, credit declined by 0.4%. RBI has set higher risk weights on unsecured loans, we continue to witness robust growth in personal loan space driven majorly by home loans, the outlook for bank credit offtake continues to remain positive, according to CareEdge Ratings.Deposit growth
Deposits too grew by 12.6% y-o-y for the fortnight (including the merger impact) and reached Rs. 209.0 lakh crore as on June 14, 2024, driven by growth in time deposits. Excluding the merger impact, growth stood at 12.1%. However, sequentially deposits decreased by 0.9%. Deposit growth is expected to improve compared to earlier periods as banks shore up their liability franchise and deposits do not constrain credit offtake.
The Short-term Weighted Average Call Rate (WACR) stood at 6.68% as of June 21, 2024, compared to 6.52% on June 23, 2023.
The Credit to Deposit (C/D) ratio has been generally hovering around 80% since September 2023. The C/D ratio saw an increase of 4 bps, compared to the previous fortnight, and stood at 79.9% for the fortnight (June 14, 2024). The HDFC merger has mainly driven this increase. If we exclude the merger impact, the C/D ratio for the current fortnight stood at 77.9% compared to 75.5% on June 16, 2023.
The prospects
In absolute terms, over the last 12 months, credit offtake expanded by Rs 26.9 lakh crore to reach Rs 167.1 lakh crore as of June 14, 2024. This growth continues to be primarily driven by continued demand for personal loans and real estate. Bank credit growth maintained high growth and outpaced deposit growth significantly in FY24. The personal loans segment has remained the largest segment, while the industrial sector reported slower growth compared to other segments.
The medium-term prospects look promising with sustained personal loans along with the anticipated increase in capex spending. Additionally, CareEdge estimates the credit growth to be in the range of 14%-14.5% during FY25. Meanwhile, ebbing inflation could also reduce the working capital demand. The effect of the HDFC merger would dissipate by the end of Q1FY25. However, elevated interest rates and global uncertainties could adversely impact credit growth.
