Bank credit growth has slowed to 11.15 per cent as compared to the same period last year, while deposit growth slightly surpassed it at 11.21 per cent, in the fortnight ending November 15, as reported by Business Standard. According to the Reserve Bank of India (RBI) data, total deposits amounted to Rs 218.54 trillion while total credit stood at Rs 173.62 trillion as of November 15.
This marked a decline from the previous two weeks, ending November 1, when deposits were Rs 220.27 trillion and loans were Rs 174.37 trillion. Both loan disbursements and deposit collections decreased during this period.
In 2024-25, banks have been prioritising deposit growth to strengthen their funding base. This comes in response to the RBI's push to reduce the gap between credit and deposit growth, said the report.
In the fortnight ending November 1, credit and deposits grew almost at the same rate by 11.9 per cent and 11.83 per cent year-on-year basis. In September, y-o-y credit growth moderated to 12.6 per cent, from 15 per cent y-o-y growth in June 2024, even as deposits grew at 11.7 per cent y-o-y, remaining close to that in the previous quarter, according to RBI data. In that month, the gap between credit and deposit growth narrowed to 90 basis points (bps) from 330 bps in June.
In November 2023, the RBI raised risk weights on unsecured consumer loans and bank lending to non-banking finance companies (NBFCs). This move could be a factor contributing to the closer alignment between credit and deposit growth. Another possible influence is the RBI's directive for banks to lower their high loan-to-deposit ratio (LDR). India’s largest private sector bank, HDFC Bank, has also moderated its credit growth in order to bring down its high LDR, contributing to the overall slowdown in credit growth.
Furthermore, Financial Services Secretary M Nagaraju on Tuesday said that public sector banks will unveil new products in the next few months to improve credit growth.
Earlier, talking to Outlook Business, Ajay Kumar Srivastava, Managing Director and CEO at State-owned Indian Overseas Bank (IOB) said that if RBI's reduces repo rate then it will also immediately impact the loan portfolios for retail and MSME (Micro, Small and Medium Enterprises) segments, which are linked to external benchmarks.
"Other portions of the credit portfolio will also be affected, albeit with a lag, as the Marginal Cost of Funds-based Lending Rate will also decline," Srivastava said.
