Banks report robust credit, deposit growth in fortnight ended Aug 11

Banks saw robust credit and deposit growth in the fortnight ended August 11, according to RBI data.

Deposit growth, however, lagged credit growth during the reporting fortnight, probably indicating that most of the ₹2,000 banknotes have been returned to the banking system and there is good demand for credit.

Deposits and credit of all scheduled bank increased by ₹67,813 crore and ₹72,575 crore, respectively, in the reporting fortnight.

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On year-on-year (yoy) basis, banks saw deposit and credit growth of 13.26 per cent and 19.39 per cent, respectively as on August 11.

Deposit growth continues to lag credit growth by a wide margin, primarily driven by contained deposits growth at public sector banks (PSBs), per an ICICI Securities report.

However, due to excess liquidity (lower Loan-to-Deposit Ratio), PSBs seem to be consciously slow in deposits mobilisation with growth at 9-11 per cent yoy in the last 3-4 quarters, said I-Sec’s equity research team comprising Jai Prakash Mundhra, Chintan Shah, Renish Bhuva and Vaibhav Arora.

• Also Read: Bank credit registers robust 16.3% y-o-y growth in June 2023

“We expect cost of deposits to stay firm in the near term, leading to further moderation in NIM (net interest margin) for most banks, keeping earnings growth muted on QoQ (quarter-on-quarter) basis.

“...While system (credit) growth has moderated, it is still healthy vs pre-Covid levels,” they said.