Thanks to the impressive growth in bank credit, which has outpaced growth in deposits during the first five months of the ongoing financial year, the yields on fixed deposits with banks are likely to go up further, The Times of India (ToI) has reported.
Bank deposits have increased by 6.6 per cent to reach Rs 149.2 trillion during the April-August 2023 period, the newspaper reported, citing Reserve Bank of India (RBI) data. On the other hand, the credit growth for the same period was 9.1 per cent and reached Rs 124.5 trillion. These figures include the merger of HDFC with HDFC Bank, which has contributed to widening the credit-deposit gap since HDFC's deposits were lower than its loans, the report added.
Looking at the absolutes, banks have added Rs 11.9 trillion in deposits, whereas their loan books have grown by Rs 12.4 trillion. The banks have been able to manage the situation because of their surplus investments in government securities, the report said.
Credit growth for the financial year 2023-24 is likely to be around 13-13.5 per cent, the report cited CareEdge Ratings, a rating agency. However, this number excludes the impact of the HDFC merger.
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CareEdge also said that the banks would likely expand their branch networks to ensure enough fund supplies and avoid any hindrance in credit offtake.
Chief economist at Bank of Baroda, Madan Sabnavis, told ToI that the difference between credit and deposit growth can be seen in the liquidity in money markets. "It is not surprising that the cost of deposits did increase in July based on RBI data, which would have persisted in August, too," ToI quoted Sabnavis.
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The weighted term deposit rate of banks has grown from 6.28 per cent in April to 6.55 per cent in July 2023.
Punjab National Bank (PNB) raised its interest rates on term deposits by 25 basis points (100 basis points = 1 percentage point). As things stand, small finance banks have the highest term deposit rates, with Unity SFB offering 9 per cent interest on 1001-day deposits.
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Among private banks, DCB offers 7.75 per cent interest on 25 to 37-month deposits. On the other hand, Punjab & Sind Bank's 7.4 per cent deposit rate is the highest among public sector banks, the ToI report said.