The credit-to-deposit (CD) ratio of banks is expected remain at over 81% in FY25 as credit growth continues to remain above the growth in deposits.
“Deposit growth is anticipated to play a leading role in FY25 as banks take further efforts to shore up their liability franchise and ensure that lagging deposit growth does not constrain the credit offtake,” CareEdge Ratings said in a report.
The rating agency added that since rate cuts are anticipated in the later part of FY25, some amounts might flow back into the banking system and improve the CASA ratios to a certain extent. CareEdge Ratings estimates the deposit growth to be in the range of 13-13.5% during the current financial year on the basis of gross domestic product forecasts and management expectations.
On the other hand, the rating agency estimates credit growth to be in the 14-14.5% range during the current financial year due to the economic expansion, rise in capital expenditure, growth in retail credit and the anticipated expansion in capex spending especially by the private sector.
However, elevated interest rates and global uncertainties may adversely impact credit growth.
As the credit to deposit ratio remains elevated, growth in the liability franchise would play a significant role in sustaining loan growth. The competition for deposits is likely to remain intense resulting in a rise in funding costs in the coming periods as the share of low-cost current account savings account deposits remains under pressure, it said.