Credit, Deposit Growth Gap Continues To Remain Elevated

Credit offtake continued to grow, increasing by 19.7 per cent year on year (YoY) to reach Rs 154.3 lakh crore for the fortnight ending 20 October 2023, said CareEdge Ratings

The rating agency stated that this surge continues to be primarily driven by the impact of HDFC’s merger with HDFC Bank and growth in personal loans. 

Meanwhile, if the impact of the merger is excluded, credit grew at a lower rate of 15.1 per cent YoY fortnight compared to last year. The outlook for bank credit offtake remains positive, with a projected growth of 13 to 13.5 per cent for FY24, excluding the merger's impact.

Deposits too witnessed growth, increasing by 13.4 per cent YoY for the fortnight (including the merger impact). Excluding merger impact growth stood at 12.6 per cent. "Sequentially, we saw a drop of 0.5 per cent," it added.

"Deposit growth is expected to improve compared to current trends in FY24 as banks look to shore up their liability franchise and ensure that deposit growth does not constrain the credit offtake," the report added. 

The short-term weighted average call rate (WACR) stood at 6.74 per cent as of 27 October 2023, compared to 6.16 per cent on 28 October 2022, due to pressure on short-term rates.