Credit offtake continued to grow albeit at a slower pace, increasing by 13.9% year-on-year (y-o-y) to reach Rs. 168.1 lakh crore, for the fortnight ending July 12, 2024. The slower rate can be attributed to a higher base effect and banks’ focus on restraining the credit-to-deposit ratio.
Deposits grew by 11.3% y-o-y for the fortnight (including the merger impact) and touched Rs. 211.8 lakh crore as of July 12, 2024, driven by growth in time deposits.
The Credit to Deposit ratio stood at 79.4% for the fortnight. “Meanwhile, if we study the credit and deposit inflows over the past 3 months and 6 months, we can observe that credit offtake has lagged the deposit growth numbers. Hence, the CD ratio derived from these flows from January would be around 70% and from March would be approximately 54%. This also indicates that the bank credit offtake could face challenges and is likely to be tepid for the year,” stated CareEdge Ratings in its latest report.
Credit offtake increased by 14.0% y-o-y but declined by 0.4% sequentially for the fortnight ended Jul 12, 2024. In absolute terms, over the last twelve months, credit offtake expanded by Rs. 20.4 lakh crore to reach Rs. 168.1 lakh crore as of July 12, 2024. The y-o-y figures are not directly comparable, as the reported data includes the impact of the merger of HDFC with HDFC Bank. Meanwhile, the slower rate can be attributed to RBI measures such as higher risk weights on unsecured loans, a higher base effect and banks’ focus on managing the Credit-to-deposit ratio. If the credit and deposit inflows over the past 3 months and 6 months are studied, credit offtake at 5.3% for six months and 2.3% for 3 months has lagged the deposit growth numbers of 6.0% and 3.4% for a similar period.
Deposits rose at 11.3% y-o-y for the fortnight (reported July 12, 2024), and sequentially witnessed a decline of 0.5%. Meanwhile, in absolute terms, deposits expanded by Rs. 23.9 lakh crore over the last 12 months and reached Rs. 211.8 lakh crore as of July 12, 2024. Deposit growth is expected to be prominent in FY25 as banks intensify efforts to strengthen their liability franchise. The banks are also sourcing funds via certificates of deposits (at a relatively higher cost) which have shown significant traction. This aims to prevent constraints on credit uptake due to deposit growth, CareEdge noted.
