Credit growth for most banks remained robust in the last quarter of FY24, maintaining a steady growth rate of 15-25 per cent, as per provisional quarter-end numbers declared by lenders so far.

A positive trend was the increase in the pace of deposit growth amid concerns regarding stretched loan-to-deposit ratios and loan growth consistently outpacing deposit growth. While year-over-year deposit growth was largely in line with credit growth at 14-26 per cent, sequential growth was higher at 4-15 per cent compared with 1-8 per cent in the previous quarter.

Sequential growth in credit for Q4 was 3-11 per cent compared with 2-8 per cent in the previous quarter. Lenders’ loan and deposit growth is typically accelerated in the last quarter of a financial year due to higher fund requirements.

NBFCs such as M&M Financial Services and Poonawalla Fincorp, too, posted strong credit growth for the quarter, with their assets under management rising by 24 per cent y-o-y and 6 per cent q-o-q, and for Poonawalla Fincorp, they rose 54 per cent on year and 13 per cent on quarter. L&T Finance posted 31 per cent on-year growth in retail loans, led by 33 per cent growth in quarterly disbursements.

Credit, deposit growth

Credit growth for banks such as South Indian Bank and YES Bank was at the lower end at 11-14 per cent, whereas for lenders such as RBL Bank, Federal Bank and AU Small Finance Bank, it was higher at 19-25 per cent.

HDFC Bank saw the highest loan growth of 55.4 per cent on-year owing to the merger of erstwhile HDFC with HDFC Bank effective July 2023. Sequentially, credit growth was 1.6 per cent higher. The bank’s deposits rose 26.4 per cent on year and 7.5 per cent on quarter.

“Of the ₹1.7-lakh crore of deposits mobilised, 77 per cent were retail deposits. This, in our view, is an excellent outcome given the current liquidity environment. CASA growth at 8.8 per cent q-o-q is also an exceptionally strong outcome,” Macquarie Research said in a note, adding that the bank is expected to have a 15 per cent incremental deposit market share in FY24.

Deposit growth for other banks, such as RBL Bank, Bandhan Bank, and Yes Bank, was accelerated. Small finance banks, too, saw high growth of 24-50 per cent, likely owing to concerned efforts by these banks on retail deposit accretion during the quarter, such as higher interest rates on specific tenure savings accounts and fixed deposits.

On the other hand, growth in deposits for lenders such as South Indian Bank and IndusInd Bank was lower at 11-14 per cent, largely in-line with their loan growth trends. CASA ratios for most banks rose sequentially, but fell on a year-on-year basis along expected lines.