Deposit growth slightly outpaces credit growth at 11.21%: RBI data

Credit growth in the fortnight ending November 15 slowed to 11.15 per cent year-on-year (Y-o-Y), while deposit growth slightly outpaced credit growth, reaching 11.21 per cent Y-o-Y, according to the latest data from the Reserve Bank of India (RBI).

 

Data shows that outstanding deposits in the fortnight ending November 15 stood at Rs 218.54 trillion, while outstanding credit stood at Rs 173.62 trillion. In the previous fortnight (November 1), outstanding deposits were Rs 220.27 trillion, while outstanding credit was Rs 174.37 trillion. Both credit disbursement and deposit mobilisation saw a decline in the reporting fortnight.

 

Credit and deposits had grown in tandem in the fortnight ending November 1. While credit grew by 11.9 per cent, deposits grew by 11.83 per cent Y-o-Y. It was in the fortnight ending October 18, after 30 months, that deposit growth of 11.7 per cent outpaced credit growth of 11.5 per cent, possibly signalling the beginning of a period where the liabilities side will keep pace with the asset side of lenders.

 

 

Credit growth had been exceeding deposit growth since the fortnight ending March 25, 2022, leading to a widening gap that reached as much as 700 basis points (bps) at its peak.

 

The alignment between credit and deposit growth now is mainly due to a slowdown in credit growth from its recent peaks. This slowdown is driven by several factors, including the RBI’s increase in risk weights on unsecured loans and loans to non-banking financial companies, stress in the unsecured retail segment of banks, and its directive for banks to reduce their elevated loan-to-deposit ratio. 

 

Moreover, HDFC Bank’s strategy to grow its loan book slower than the industry average to bring down its elevated credit-deposit ratio is also contributing to the slowdown in credit growth. Following this slowdown, several credit rating agencies have revised their projections, estimating credit growth to be in the range of 13-15 per cent and deposit growth between 12 per cent and 13 per cent.

 

“Deposit growth is expected to be around 12-13 per cent. Credit growth needs to align with that number. The two cannot grow at different rates. Deposits have become the fulcrum of everything,” Amitabh Chaudhry, managing director and chief executive officer of Axis Bank, told Business Standard in an interview earlier.

 

Deposits have remained a key focus in 2024-25, as banks intensify efforts to strengthen their liability franchises, following the RBI’s encouragement to narrow the gap between credit and deposit growth.

 

While private sector banks have grown their deposit franchise well, state-owned banks have lagged their private sector peers in this area. However, state-owned lenders have mitigated this by tapping into the domestic bond market and raising funds through infrastructure bonds to support long-term lending.

 

That said, experts believe credit growth will still outpace deposit growth going forward, as credit activity typically picks up in the fourth quarter.

 

Meanwhile, State Bank of India has guided that its loan book will grow by 14–16 per cent, while its deposits will grow by 10 per cent.