The CD ratio of scheduled commercial banks stood at 77.65% in the fortnight ended March 29.
Non-food credit, or loans to individuals and companies, grew 13.75% y-o-y during the fortnight ended March 29, slower than the 14.4% y-o-y growth in the previous fortnight. During the comparable fortnight a year ago, the non-food credit growth of the scheduled commercial banks stood at 10.54%, data from the Reserve Bank of India (RBI) showed.
Meanwhile, deposits in the banking system grew 10% y-o-y during the fortnight ended March 29, similar to the growth reported in the fortnight ended March 15. The bank deposit growth in the fortnight ended February 15 was at 10.2%, the highest in at least one-and-a-half years, showed RBI data. The modest increase in deposits has been a cause for concern.
Bank credit in India is expected to grow at 13-14% on an average between FY19 and FY20, significantly faster compared with 8% in FY18. That would force a change in deposit mobilisation plans of banks over the medium term, said experts at Crisil Ratings. To meet this credit growth, banks will have to raise about Rs 25 lakh crore over the two fiscals, observed experts.
“The low deposit growth is attributable not only to technical reasons such as rising currency in circulation (CIC), but also to structural and cyclical factors – constant moderation in nominal GDP growth and a change in households’ behaviour from savings-focused investor to consumption-focused leveraged consumer,” said experts at Edelweiss.
On February 28, SBI had raised interest rates on retail fixed deposits (FDs) for the first time in close to three-and-a-half years. Between February and September, the rate offered by the bank for one-year money rose 45 basis points (bps) to 6.7% per annum. The savings rate at the bank, as at most of its large peers, stands at 3.5%.
The credit-deposit ratio (CD) ratio of the scheduled commercial banks stood at 77.65% in the fortnight ended March 29, marginally lower compared to 77.7% in the previous fortnight. However, in the comparable period a year ago, the CD ratio of the banks was 75.12%, showed the RBI data.
“Lower deposit growth has meant a steady rise in the CD ratio on a stock basis, which is expected to touch 78% by the end of FY19, compared with 74% in FY18 and 73% at the end of FY17. Banks will need to raise at least Rs 19-20 lakh crore of fresh deposits until March 2020 to keep the CD ratio near 80%, which in itself would be highest in a decade,” said experts at Crisil.
Ashutosh Khajuria, executive director of Federal Bank, said: “The credit growth has shown a double digit improvement in the entire year on account of consistent demand of the credit from the industry. After the liquidity crisis in the NBFC sector, the credit demand in the scheduled commercial banks has further increased. The absolute growth in the credit has also been more than the absolute growth in deposits, which has also led to a high CD ratio.”