look news india
MUMBAI: After exceeding credit growth in the fortnight of October 18 after a period of two-and-a-half years, deposit growth in the fortnight of November 1 was almost at par with credit growth, RBI data showed. According to Reserve Bank data, credit growth stood at 11.90 per cent year-on-year in the fortnight ended November 1, while deposit growth stood at 11.83 per cent. There are signs of decline in deposit growth again.
Higher deposit rates may make it difficult for banks to maintain deposit growth. At the end of the fortnight of November 1, outstanding loans stood at Rs 174.39 trillion, while deposits stood at Rs 220.43 trillion.
In the fortnight ending October 18, deposit growth in the banking system was 11.74 percent and credit growth was 11.52 percent. At one point, credit growth was seen to be seven per cent higher than deposit growth.
The rise in the country’s stock markets reduced the attractiveness of bank deposits as household savings shifted to equities.
One reason for the narrowing gap between deposit and credit growth is considered to be the slow pace of loan withdrawal. Credit growth has also slowed down due to the Reserve Bank raising risk weights and a crackdown on unsecured loans, a banker said.
Sources in the banking sector said that in recent times, there has been an increase in deposits due to increase in interest rates on deposits by 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. Meanwhile, a report by S&P said that banks will find it difficult to keep up with credit growth in deposit growth in 2025. Higher interest rates on deposits are likely to impact the net interest margins of banks.
