Synopsis
- Credit offtake continued to show robust growth, increasing by 19.7% year on year (y-o-y) to reach Rs. 148.0 lakh crore for the fortnight ending July 28, 2023. This surge continues to be primarily driven by the impact of HDFC’s merger with HDFC Bank, as well as growth in personal loans and NBFCs. Meanwhile, if merger impact is excluded, credit grew at a lower rate of 14.7% y-o-y for the same fortnight.
- Deposits too witnessed healthy growth, increasing by 12.9% y-o-y for the fortnight (including the merger impact). On a pro forma basis, deposits grew by 12.3% y-o-y during the same period. The growth in deposits has not been at the same pace as credit since the larger proportion of liabilities of HDFC was by way of borrowings rather than just deposits.
- The outlook for bank credit offtake remains positive, with a projected growth of 13-13.5% for FY24, excluding the merger’s impact.
- Deposit growth is expected to improve in FY24 as banks look to shore up their liability franchise and ensure that deposit growth does not constrain the credit offtake.
- The Short-term Weighted Average Call Rate (WACR) stood at 6.39% as of August 04, 2023, compared to 4.72% on August 05, 2022. Banking system liquidity remained in surplus through the month, at an average monthly surplus of around Rs 1.7 lakh crore in July. A temporary provision of incremental cash reserve ratio for SCBs was introduced to manage liquidity, CareEdge Economics expects this new measure to absorb liquidity worth Rs 1 lakh crore from the system which is also likely to impact short term rates.
