Analysts at Kotak Institutional Equities said the ongoing improvement in the balance sheet of banks can support the overall credit growth by offsetting NBFCs' likely lower disbursements.
Non-food bank credit grew by 13.01% year-on-year (y-o-y) for the fortnight ended May 10, but marginally slower than 13.13% y-o-y reported in the previous fortnight, as per the data released by the Reserve Bank of India (RBI). Outstanding loans to companies and individuals stood at Rs 95.64 lakh crore at the end of May 10, a tad lower than Rs 95.77 lakh crore on April 26.
Meanwhile, aggregate deposits in the banking system grew 10.35% y-o-y to Rs 125.17 lakh crore as on May 10, compared with the 9.70% y-o-y increase to Rs 124.86 lakh crore in the previous fortnight. The management of IndusInd Bank said on Wednesday the loan growth in Q4FY19 was well diversified, with a few products like credit cards and loans to small corporates growing faster. The lender announced a smart increase of 29% year-on-year in advances for the quarter and guided for a loan growth in the mid-twenties for 2019-20.The management attributed the 29% y-o-y deposit growth to healthy accretion across CASA and term deposits.
Banks have been cutting their lending rates lately. For instance, State Bank of India recently reduced its marginal cost of fund-based lending rate (MCLR) by 5 bps to 8.45% per annum. The retail segment continues to be the key loan-growth driver and there is demand for personal loans and auto loans, Amitabh Chaudhry, MD & CEO, Axis Bank, said recently. “We will continue to leverage on this strength,” Chaudhry said.
Analysts at Kotak Institutional Equities said the ongoing improvement in the balance sheet of banks can support the overall credit growth by offsetting NBFCs’ likely lower disbursements. This was in the context of liquidity problems of non-banking financial companies (NBFCs) and possibly solvency challenges of certain housing finance companies (HFCs) dampening credit growth and consumption demand.
The credit-deposit ratio (CD) of the banking system stood at 76.40% in the fortnight ended May 10, marginally lower compared to 76.70% in the previous fortnight, led by a rise in the deposit growth momentum. In the comparable period last year, the CD ratio of the banks was at 74.52%, showed the RBI data.