Informist, Thursday, Oct. 31, 2024

MUMBAI – The on-year growth in banks' outstanding deposits as of Oct. 18 outpaced the loan book growth for the first time since April 2022, the data from the Reserve Bank of India showed. Indian banks' loan book grew 11.5% on year to INR 172.38 trillion as of Oct. 18, while deposits rose 11.7% to INR 218.08 trillion.

In the past few months, top RBI officials on several occasions have flagged the risk that India's banking sector could face significant liquidity risks owing to the widening credit-deposit gap. Recently, households have been mobilising their savings into capital markets, instead of traditional instruments like bank deposits and small savings schemes. About 20% of Indian households are now channelling their savings into financial markets.

In August, Finance Minister Nirmala Sitharaman also advised banks to establish a healthy balance between the growth rate in their credit disbursal with that of their deposit collections. "Banks should also bring innovative portfolios and make deposits more attractive," Sitharaman had said.

With credit growth outpacing deposit growth, most banks have raised their deposit rates amid rising competition and have been increasingly relying on bulk term deposits and certificates of deposit to fund asset growth.

The deceleration in credit growth is seen primarily amongst the private sector banks as they aim to reduce their loan-deposit ratios and maintain them at a balance, analysts said.

The measures from the RBI in November, which included an increase in risk weights on banks' personal and credit card loans and an increase in the risk weights on banks' exposures to non-bank finance companies, have also brought down credit growth in some segments of personal loans.

In September, the RBI also called on lenders to review their gold loan policies and processes after its review revealed several irregularities. The central bank also warned that non-compliance with its directions "will be viewed seriously and will attract, among other things, supervisory action".

Bank deposits fell INR 1.13 trillion and loans by INR 595.28 billion on a fortnightly basis. The investments by the banks rose 7.2% on year to INR 64.88 trillion as of Oct. 18 and were up by INR 314.06 billion on a fortnightly basis.

Scheduled Commercial Banks (including RRBs):
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All Scheduled Banks:

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* Provisional figures incorporated in respect of such banks as have not been able to submit final figures.
Notes :

(A) Demand and Time Liabilities do not include borrowings of any Scheduled State Co-operative Bank from State Government and any reserve fund deposits maintained with such banks by any co-operative society within the areas of operation of such banks.
** This excludes deposits of Co-operative Banks with Scheduled State Co-operative Banks. These are included under item II (a).
@ Other than from Reserve Bank, National Bank for Agriculture and Rural Development and Export Import Bank of India.
(B) The figures relating to Scheduled Commercial Banks' Borrowings in India from the Reserve Bank and balances with the Reserve Bank are those shown in the statement of affairs of the Reserve Bank. Borrowings against usance bills and/ or promissory notes are under Section 17(4)(c) of the Reserve Bank of India Act, 1934.
# This excludes advances granted by Scheduled State Co-operative Banks to Co-operative banks. These are included under item VIII (a).
+ Includes Treasury Bills, Treasury Deposits, Treasury Savings Certificates and postal obligations.
$ Includes advances granted by Scheduled Commercial Banks and State Co-operative Banks to Public Food Procurement Agencies viz. Food Corporation of India, State Governments and their agencies under the Food Consortium.

The expression 'Banking System' or 'Banks' means the banks and any other financial institution referred to in sub-clauses (i) to (vi) of clause (d) of the explanation below Section 42(1) of the Reserve Bank of India Act, 1934.

No. of scheduled commercial banks as on current fortnight: 135

End

Reported by Richard Fargose

Compiled by Mansi Patil

Edited by Tanima Banerjee

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