Synopsis:
- Net Interest Income (NII) of Scheduled Commercial Banks (SCBs) grew by 26.5% year-on-year (y-o-y) to Rs. 1.84 lakh crore in Q1FY24 due to healthy loan growth and a higher yield on advances over the year-ago period.
- The Net Interest Margin (NIM) of SCBs witnessed a year-on-year improvement of 36 basis points (bps), reaching 3.27% in Q1FY24. This enhancement can be attributed to the faster repricing of loans, whereas deposit rates have not yet reflected the increased interest rates. Besides, SCBs witnessed higher-than-expected deposit growth in the quarter. The anticipated rise in deposit costs, which is expected to be a lag effect, is likely to put continued pressure on NIM in Q2FY24.
- Other PSBs’ NIM expanded by 41 bps y-o-y at 2.85% in Q1FY24, outperforming large PSBs and PVBs.
- SCBs reported a robust rise in advances at 16.7% y-o-y in Q1FY24 mainly driven by personal loans, NBFCs and MSMEs, with similar growth for private sector banks (PVBs) and public sector banks (PSBs). SCBs witnessed a 13.5% y-o-y deposit growth in the quarter, within this PVBs’ deposits rose by 17.4% y-o-y in Q1FY24. Meanwhile, deposit growth lagged in credit growth with sluggish CASA growth.
- In terms of sequential performance, SCBs’ NIM contracted by 2 bps to 3.27% due to a drop in the NIM of large PSBs. Though, the NIM of Other PSBs and other PVBs expanded by 8 bps and 6 bps in the quarter.
- The Credit and Deposit (C/D) ratio stood at 75.1% as of July 01, 2023, expanding by ~210 bps y-o-y over a year ago due to faster y-oy growth in credit compared to deposits.
