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Credit growth improves to 13.3% YoY as of 1st Jul’22; deposits jump 9.8% YoY

Retail loans up ~16% YoY in May’22, constitutes ~31% of total loans

* Systemic loan growth continues to recover and remained healthy (up 13.3% in the fortnight ended 1st Jul’22). The outstanding credit base stood at INR123.8t. In FY23 to date, loans grew 4.1%. We expect systemic credit growth to maintain its traction and grow ~12.0%/13.5% YoY in FY23/FY24, respectively.

* Retail loan growth continues to remain strong (up 16.4% YoY), driven by a growth of ~30%/~14% YoY in Credit Cards and Home/Auto loans, respectively. Mix of retail loans increased to 31.1% from 29.8% in FY21.

* Industry credit growth is recovering gradually (~+8.7% YoY in May’22 v/s ~+8% YoY in Apr’22). Within the industry, credit to medium industries registered a robust growth of 49.3% YoY. Credit to micro and small industries accelerated to 33% YoY. However, credit to large industries remained muted at 1.9% YoY, but is witnessing signs of a recovery.

* Credit growth in the Services sector too improved to 12.9% YoY in May’22 from 11.1% YoY in Apr’22 led by healthy growth in NBFCs (+20.6% YoY). Credit to Agriculture picked up and grew 11.8% YoY in May’22 v/s 10.6% YoY in Apr’22.

* Deposit growth remained relatively modest at 9.8% YoY for the fortnight (up 3.0% in FY23 to date). The outstanding deposit base stood at INR169.6t. Within deposits, banks have seen an improvement in garnering Retail deposits resulting in an uptick in the CASA ratio across most banks. With the recent hike in deposit rates, we expect deposits to gain further momentum.

* The Credit-to-Deposit (CD) ratio for the system improved to 73% from 69.5% in Nov’21. The incremental CD ratio for the fortnight came in at ~96%.

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