Bank credit growth rises to 17.94% YoY in early Oct, shows RBI data

Deposit growth not that impressive, increases by 9.62% to Rs 172.72 trn

Bank credit rose by 17.94 per cent year-on-year (YoY) to Rs 128.6 trillion as of October 7 to reflect festive and quarter-end demand, according to data from the Reserve Bank of India (RBI).

Deposits at banks increased 9.62 per cent YoY to Rs 172.72 trillion as of October 7. Sequentially, commercial banks raised Rs 2.41 trillion in deposits during the fortnight ended October 7.

As for credit growth fortnightly, the outstanding loan book of scheduled commercial banks grew by 1.82 per cent (Rs 2.31 trillion) from Rs 126.29 trillion on September 23, 2022. The YoY growth in credit was 16.4 per cent as of September 23, 2002.

Bankers said demand from the retail segment increases during festivals. Also, credit taken by corporates is higher ahead of the end of the quarter (second quarter). Part of this build-up may reverse in the early part of the third quarter. There is a shift in fund-raising activity from debt to loans as lending rates in the market have hardened due to tight liquidity conditions.

Rating agency CareEdge’s analysis said last week credit growth is likely to continue in the short term due to festive season. After modest credit growth in recent years, the medium-term prospects look promising with diminished corporate stress and a substantial buffer for provisions. However, inflation remains a key risk.

Global inflation remains high despite hawkish policies by world central banks. This may lead to demand issues globally and cause second-order effects in India. Credit growth is expected to be in the range of 12-13 per cent for FY23, as previously estimated by CareEdge. However, rate hikes could impact credit growth.