The deposit growth of banks is expected to improve in 2023-24(April-March) as banks shore up their liability franchise and ensure that deposit growth does not impact credit off take.
Deposits rose at 13.5% y-o-y for the fortnight ended August 11, latest data showed. It rose 0.4% on a sequential basis. In absolute terms, deposits rose Rs 22.8 trillion year-on-year(y-o-y) to Rs 192.4 trillion as on August 11.
“Demand deposits have dropped sequentially as the withdrawal cycle of Rs 2000 notes is moving towards its end,” credit rating agency CareEdge Ratings said in a report.
“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,” it added.
While deposit growth is pegged at 12.8% y-o-y without the impact of the merger, deposits have grown by more than 12.5% y-o-y for the first time since 2017.
Credit offtake rose 19.7% y-o-y to Rs. 148.8 trillion for the fortnight ended Aug 11, 2023, largely driven by the impact of Housing Development Finance Corporation’s(HDFC) merger with HDFC Bank, as well as growth in personal loans and loans to non-banking financial companies.
If the impact of the merger is excluded, loans grew 14.8% y-o-y in the fortnight under review.
The credit rating agency expects loans to grow at 13-13.5% in 2023-24, excluding the impact of the merger of HDFC and HDFC Bank.
“The outlook for bank credit offtake remains positive, supported by factors such as economic expansion, increased capital expenditure, the implementation of the PLI scheme, and a push for retail credit,” CareEdge said.
The personal loan segment is expected to perform better than industry and service segments in 2023-24. But, the impact of high interest rates must be monitored.