Deposits continue to be primary source of funds for SCBs while NBFCs depend primarily on borrowings

Deposits continue to be the primary source of funds for Scheduled Commercial Banks or SCBs, amounting to Rs 217 lakh crore, which represented 77 per cent of total liabilities at the end of FY 2024, Rajeshwar Rao, Deputy Governor of the Reserve Bank of India, highlighted in a latest speech. He noted further that in contrast, capital funds (i.e., capital, reserves & surplus) and borrowings, each constituted around 9 per cent of liabilities. The comparison of data between FY 2016 to FY 2024 indicates that the deposits have grown at an annual rate of around 10 per cent, aligning with the overall balance sheet growth, and their contribution to total liabilities has remained stable at around 77 per cent. Meanwhile, borrowings have grown at a slower rate of 7 per cent as a result of which its share in total liabilities has decline from 11 per cent to 9 percent. On the other hand, Capital Funds have grown at close to 13 per cent and its share has increased progressively from 7.6 per cent to 9.3 per cent, indicating the deleveraging of banks' balance sheets, boosted by higher profitability and capital raising efforts.

Maturity wise, during the same period, the contribution of term deposits has declined from 65.8 per cent of total deposits to 60.9 per while the shares of savings and current account deposits have increased from 25.3 per cent and 8.9 per cent to 29.2 per cent and 9.9 per cent, respectively. Consequently, CASA ratio has improved from 34.2 per cent to 39.1 per cent. This trend may have contributed to the improvement in Net Interest Margins (NIMs) of SCBs, which has increased from 2.6 per cent in FY 2015-16 to 3.3 per cent in FY 2023-24. For Non-Banking Financial Companies (NBFCs), borrowings are a significant source of funding, amounting to ₹34.46 lakh crore or 68 per cent of total liabilities as at end-March 2024, Rao noted.

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