Synopsis
- Credit offtake rose by 15.7% year on year (y-o-y) for the fortnight ended April 07, 2023. In absolute terms, credit offtake expanded by Rs.18.8 lakh crore to Rs.138.5 lakh as of April 07, 2023. The growth has been driven by personal loans, robust growth in NBFCs, and higher working capital requirements due to inflation. [3:37 pm] Harsh Vardhan
- Deposit growth witnessed a slower growth at 10.2% y-o-y compared to credit growth for the fortnight ended April 08, 2023. The short-term Weighted Average Call Rate (WACR) has reached 6.32% (as of April 14, 2023) from 3.47% as of April 15, 2022, due to a rise in policy rates and lower liquidity in the system but has decreased from 6.78% as on March 31, 2023.
- The Credit to Deposit (CD) Ratio as of April 7, 2023, fell sequentially to 75.0% from 75.9% in the previous fortnight as the incremental addition to deposits at Rs 4.1 lakh crore was higher by 2.4 times compared to Either should fit in two lines
incremental credit offtake at Rs 1.7 lakh crore. This has also resulted in the Incremental CD Ratio falling from 113.0% to 41.9%.
Bank Credit Growth Remains Robust
Note: Bank credit growth and related variations for all fortnights since December 3, 2021, are adjusted for past reporting errors by select scheduled commercial banks (SCBs). However, RBI has not yet updated these numbers in its database except for fortnightly documents. The quarter-end data reflect, the last fortnight’s data of that particular quarter; Source: RBI, CareEdge
- Credit offtake rose by 15.7% y-o-y for the fortnight ended April 7, 2023, compared to 11% from the same period in the last year (reported April 08, 2022). Sequentially, it increased by 1.2% for the fortnight. In absolute terms, credit outstanding stood at Rs.138.5 lakh crore as of April 07, 2023, rising by Rs.18.8 lakh crore from April 2022 vs 11.8 lakh crore in the same period from the last year. The credit growth has been driven by a lower base of the last year, unsecured personal loans, housing loans, auto loans, higher demand from NBFCs, and higher working capital requirements due to elevated inflation from select industries.
- Credit offtake has remained robust even amid the significant rise in interest rates, and global uncertainties related to geo-political, and supply chain issues. The growth has been broad-based across the segments. Personal Loans and NBFCs have been the key growth drivers. Meanwhile, credit growth is expected to be in
1 .Credit to Deposit Ratio Falls as Increase in Deposit Exceeds Credit for Fortnight sync with the GDP growth in FY24. A slowdown in global growth due to elevated interest rates, and geopolitical issues could impact credit growth.
- Deposits stood at Rs.184.5 lakh crore for the fortnight ended April 07, 2023, registering a growth of 10.2% y o-y. Time deposits grew by 10.3% y-o-y, while demand deposits rose by 9.3% in the reporting fortnight vs. 9.3% and 16.1% y-o-y, respectively, reported in the fortnight ended April 08, 2022. Meanwhile, in absolute terms, bank deposits have increased by Rs.17.1 lakh crore from April 2022. It also increased by Rs.4.1 Lakh crore from the immediate previous fortnight (reported March 24, 2023). With liability franchise gaining importance, due to a high gap in credit-deposit growth, bank deposit rates have risen, and deposit growth would continue to be monitored.
- The Credit to Deposit (CD) ratio has been generally trending upward since the later part of FY22 and reached 75.0% in the fortnight, expanding by ~350 bps y-o-y from April 08, 2022, due to continued faster growth in credit as compared to deposits. The CD ratio has been hovering near the pre-pandemic level of 75.8% in Feb 2020 and 75.7% in March 2020. If sequential movements of credit and deposit in Rs lakh crore are considered, the above figure presents a slightly different picture, with only the 12-month period showing an increase of credit over deposits, while for other periods, deposit accretion has been higher than credit offtake in absolute numbers. According to CareEdge Economics, liquidity has tightened significantly on account of strong credit growth, advance tax outflows and LTRO and TLTRO redemptions. The extent of tightness is evident from the sharp spike in yields on short-term instruments and overnight call rates rising above the repo rate. Given that LTRO/TLTRO redemptions of Rs 61,000 crore are due in April, liquidity conditions remain strained.
- Credit growth generally began picking up in H2FY22 and surpassed deposit growth in Q4FY22, since then it has continued the momentum. A part of the funding gap has been met by the mobilisation of Certificates of Deposits (CDs). A wide gap in credit and deposit growth, lower liquidity and strong credit demhashave been driving for higher issuance of CDs. Banks are keeping their CD issuance elevated to meet short-term requirements amid lower liquidity and focusing on shoring up the deposits to meet robust credit demand. Fund mobilisation through CDs issuances was strong at Rs 6.7 lakh crore during FY23, higher than Rs 2.3 lakh crore in the previous year. The outstanding CDs stood at Rs 3.0 lakh crores as of April 07, 2023, compared to Rs. 2 Credit to Deposit Ratio Falls as Increase in Deposit Exceeds Credit for Fortnight lakh crore a year ago.Proportion of Credit to Total Assets and Govt. Investment to Total Assets Decrease (y-o-y)
- The share of bank credit to total assets decreased by 25 bps y-o-y and 17 bps sequentially to 67.1% in the fortnight. Total assets of banks rose by 16.1% y-o-y in the last one year and remained ahead of credit growth.
• The proportion of government investment to total assets remained flat y-o-y for the fortnight ended April 07, 2023, compared to a similar fortnight in the last year (reported April 08, 2022) as assets growth was the same as the growth in investments. The Govt. investments stood at Rs.55.2 lakh crore as of April 07, 2023, reporting a 16.1% y-o-y growth.
- In terms of absolute growth, credit offtake rose by 34.8% from March 27, 2020, whereas deposit growth came in at 36%. Major credit growth has been reported in FY23 compared to FY22 and FY23
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