SCBs See Mixed Q3 As NIM, RoAs Remain Flat Despite Business Growth

India’s Scheduled Commercial Banks (SCBs) witnessed a 13.3 per cent year-on-year (YoY) deposit growth for the quarter. Deposit growth continued to lag credit growth with sluggish current account and saving account (CASA) growth, partially offset by the growth in time deposits.

In a report, CareEdge Ratings has said that SCBs reported a robust rise in advances at 20.3 per cent YoY in Q3FY24 driven by the merger and personal loans. Credit growth was mainly aided by continued momentum in retail growth. 

However, the net interest margin (NIM) for SCBs remained flat sequentially and stood at 3.14 per cent, as the rising cost of deposits dented the NIM margin. Notably, the pre-provisioning operating profit (PPOP) grew by a moderate 2.7 per cent YoY to Rs 1.29 lakh crore driven by growth in Net Interest Income (NII), which was offset by higher operating cost. 

“This was despite total income growth of 25.1 per cent. Meanwhile, PPOP increased marginally by 1.3 per cent on a sequential basis,” it added. With the NNPA ratio of SCBs reduced to 0.7 per cent from 1.2 per cent in Q3FY23 which is an all-time low, credit costs were lower at 0.38 per cent in Q3FY24 dropping 35 BPS YoY.

“Overall, the return on assets (RoA, annualised) of SCBs declined marginally by 1 bps y-o-y and 7 bps sequentially to 1.21 per cent in Q3FY24 due to higher growth in advances (higher base),” it stated.

The report also added that credit offtake experienced robust growth of 20.3 per cent in Q3FY24 (driven by merger impact and personal loans). Deposit growth was also healthy primarily attributable to the growth in term deposits which have transitioned to a higher rate. 

However, CASA growth remained lethargic across the industry, contributing to a sequential rise in funding costs. Additionally, as the credit-to-deposit ratio remains elevated, growth in the liability franchise would play a significant role in sustaining loan growth.