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Synopsis

* Credit offtake rose by 15.9 % (y-o-y) for the first quarter of FY24. In absolute terms, credit expanded by Rs.9.8 lakh crore from June 2022. The growth has been driven by sustained personal loan demand and NBFCs.

* Deposits witnessed a slower (compared to credit) growth at 12.6% (y-o-y), supported by term deposits which were offset by high base and slow CASA growth.

* Scheduled Commercial Banks’ (SCBs) y-o-y growth in term deposits at 17.4% outperformed current account and saving account (CASA) growth at 6.4% as term deposits have seen a sharper growth in interest rates, and hence customers are shifting, as well as adding funds from low yielding CASA deposits to term deposits

* In last three years, (i.e., from March 2020) credit offtake has mostly overcome the Covid-induced lag and has grown by around 35.8% to almost catch up with deposit growth of 36.6% over the same period.

* The Credit Deposit (CD) ratio of SCBs rose by 210 bps y-o-y at the end of June 2023, due to higher credit growth and reached 75.8%.

* Meanwhile, the o/s Weighted Average Lending Rate (WALR) on SCBs increased sequentially by 10 basis points (bps) from 9.72% in March 2023 to 9.82% in June 2023. The o/s Weighted Average Term Deposit Rate (WATDR) for SCBs increased sequentially by 31 bps from 6.16% in March 2023 to 6.47% in June 2023. Over the last year, due to the increase in repo rate (210 bps)

SCBs Credit Offtake Continues to Outpace Deposit Growth

Figure 1: Share in Total Deposits and Credit %

Figure 2: SCBs Growth Trend (y-o-y, %)

* As of June 30, 2023, the credit outstanding touched Rs 140.5 lakh crore, registering a growth of 15.9% yo-y as compared to 14.3% in Q1FY23, with private banks continuing to gain market share.

* Outstanding deposits reached Rs.185.3 lakh crore as of June 30, 2023, registering a 12.6% growth y-o-y. Overall deposits of PVBs and PSBs rose in double digits, whereas FBs reported a growth of 6.1%. 

* Term deposits saw a double-digit growth and outperformed CASA.

* In last few years, (i.e., from March 2020) credit offtake has caught up the Covid-induced lag with deposits and has grown by around 38.5% when compared with deposit growth of 39.5% over the period.

Figure 3: Growth in June 2023 vs. March 2020

* Credit growth when compared from pre-Covid period (taken as of March 2020) is gradually reaching deposit growth across bank groups driven by PSBs credit growth post March 2020, was almost at par with deposit growth, growing at 30.4% and 31.1%, respectively for Credit and Deposit. In terms of credit and deposit growth, PVBs grew faster than PSBs.

* However, PSBs sustained performance for credit growth in the coming quarters is expected to slow the pace of gaining share by PVBs.

* SFBs saw a significant increase due to lower base effect.

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