Credit growth is trending down and continues to converge with deposit growth on an annual basis.
Credit offtake increased by 5.8% compared to December 2023, to reach Rs. 168.8 lakh crore as of August 9, 2024, while deposits rose at 6.2% compared to December 2023 and reached 213.3 lakhs crore, driven by growth in time deposits. Sequentially deposits increased by 0.6%.
“In absolute terms, Deposit growth has outpaced credit growth, especially after RBI’s circular on risk weights and comments on reducing the CD Ratio. Additionally, we can also see that the CD Ratio on these flows from January would be 74% and from April would be 85%. This also indicates that the credit offtake could face challenges and be tepid for the year,” a CareEdge report said.
Credit growth
Credit offtake increased by 5.8% compared to December 2023 and sequentially increased by 0.4% for the fortnight ended August 9, 2024. In absolute terms, over the last 8 months, credit offtake expanded by Rs 9.2 lakh crore to reach Rs. 168.8 lakh crore as of Aug 9, 2024.
Personal loans and MSMEs account for the bulk of credit increase with corporate credit also contributing to the same. Meanwhile, sequentially credit saw a growth of 0.4%. This slowdown can be attributed to RBI measures around higher risk weights on unsecured loans and a higher base effect also by proposed LCR norms bank credit growth could face challenges in coming months.
Demand in MSME and Commercial Real estate has supported credit growth. The Short-term Weighted Average Call Rate (WACR) has remained the same at 6.48% as of August 14, 2024, compared to 6.68 as of August 18, 2023.
Deposit growth
In absolute terms, deposits have expanded by Rs 12.5 lakh crore over the last 8 months. Deposits would continue to be prominent in FY25 as banks intensify efforts to strengthen their liability franchise. The banks are also sourcing funds via the certificates of deposits (at a relatively higher cost) which have shown significant traction.
On y-o-y performance, credit saw a growth of 13.5%, which was relatively slow compared to last year which saw a growth of 19.7%, on the other hand, deposits saw a growth of 10.9%. Deposit growth, though showing improvement, has continued to lag credit growth in the past year.
