The battle for deposits will intensify

The challenge before the banking system is how to keep the net interest margin healthy in a rising interest rate cycle

As of October 7, the banking system’s deposit portfolio is to the tune of Rs 172.8 trillion and the loan book Rs 128.6 trillion. During the current financial year so far, deposit growth has been 4.9 per cent in contrast to 8.1 per cent growth in credit.

This is in keeping with the trend of the past one year — a 9.6 per cent deposit growth versus 17.9 per cent credit growth. Indeed, the pile of deposits is far bigger than that of the banking system’s loans portfolio but even in absolute terms, in the past one year, credit growth has