look news india
Mumbai: In the fortnight ended November 29, credit growth in the banking sector slowed marginally to 10.64 per cent, almost at par with deposit growth. Reserve Bank figures show that the growth in deposits during this period has been 10.72 percent. Credit and deposit growth have once again been seen at the same pace.
At the end of the fortnight of November 29, outstanding deposits stood at Rs 220.17 trillion, while outstanding loans stood at Rs 175.09 trillion. Earlier, in the fortnight of November 15, the outstanding deposits figure was Rs 218.55 trillion while the outstanding credit figure was Rs 173.62 trillion. In the fortnight of November 15, credit growth in the banking sector slowed down to 11.15 percent on an annual basis, while deposit growth stood at 11.21 percent.
After a period of two and a half years, after the fortnight of October 18 was higher than the credit growth, deposit growth was seen almost equal to the credit growth in the fortnight of November 1.
At one time credit growth was seen to be seven per cent higher than deposit growth. Due to the rise in the country’s stock markets, domestic savings are moving towards equity, due to which there is a decrease in attraction towards deposits in banks. According to a recent research report, the allocation of household savings to equities has increased from 15 percent in 2020 to 25 percent in 2024.
One reason behind the narrowing gap between deposit and loan growth is considered to be the slow pace of loan withdrawal. Credit growth can be said to have slowed down due to the increase in risk weighting by the Reserve Bank as well as the crackdown on unsecured loans. Earlier, only unsecured loans saw slow growth, but now from the available data secured loan growth is also slowing down.
In its latest monetary policy review, the Reserve Bank has reduced the cash reserve ratio from 4.50 per cent to 4 per cent as part of increasing credit offtake in banks to provide more liquidity in the hands of banks to provide loans.