Synopsis: India's Scheduled Commercial Banks (SCBs) have reported robust credit growth of 19.3% year-on-year in the final quarter of FY24, reaching a total outstanding credit of Rs 164.3 lakh crore by March 2024. This marks an increase of Rs 26.6 lakh crore since March 2023. Key drivers include strong consumer demand, increased lending to Non-Banking Financial Companies (NBFCs), and the impact of recent mergers.
The credit expansion in India's Scheduled Commercial Banks (SCBs) has surged, reporting a 19.3% year-on-year growth in the final quarter of FY24, according to a CareEdge report.
This growth translates to an absolute increase of Rs. 26.6 lakh crore since March 2023, reaching a total outstanding credit of Rs. 164.3 lakh crore by March 31, 2024.
Key drivers behind this increase include a notable rise in personal loans and increased lending to Non-Banking Financial Companies (NBFCs), alongside the impact of recent mergers.
The report attributes this growth to strong consumer demand and robust lending activities.
Urban areas have seen a rise in market share, driven by corporate capital expenditures and increased utilization rates.
The western region has outperformed others, recording a 20.4% year-on-year growth in credit offtake, highlighting its vigorous economic activities.
The central region reported the highest credit growth at 21.6%, amounting to Rs. 15.1 lakh crore.
The southern and northern regions also displayed strong performances with growth rates of 19.8% and 16.6%, respectively.
However, deposit growth lagged behind credit growth with a 13.6% year-on-year increase, totalling Rs. 206.1 lakh crore by March 2024.
Metropolitan areas led the deposit growth with a 14.7% year-on-year rise, indicating steady inflows from corporates and high-net-worth individuals.
Term deposits surpassed Current Account and Savings Account (CASA) deposits with an 18.8% year-on-year growth driven by higher interest rates.
The credit to deposit (CD) ratio surged by 380 basis points to 79.7% as of March 2024, driven by heightened credit growth and merger impacts in the banking sector.
Private sector banks (PVBs) reported robust credit growth of 27.9%, expanding their market share to 41.8%, up by 282 basis points year-on-year.
Public sector banks (PSBs) recorded a credit growth of 13.6%, reaching Rs. 87.6 lakh crore in Q4FY24.
The recent HDFC merger significantly bolstered private sector banks' credit growth and market share expansion.
Excluding merger effects, PVBs still showed strong growth, approximately 14.7% year-on-year in credit.
The Weighted Average Lending Rate (WALR) for Scheduled Commercial Banks (SCBs) increased by 11 basis points to 9.83% in March 2024, reflecting tightening monetary policies.
The Weighted Average Domestic Term Deposit Rate (WADTDR) rose by 72 basis points year-on-year to 6.88%, enhancing term deposit attractiveness.
The western region's robust economic growth cemented its leading position in credit expansion, accounting for 34% of total credit by March 31, 2024.
Urban and semi-urban areas reported healthy deposit growth of 13%, while metropolitan areas continued to dominate with a 55.2% market share.
Looking ahead, the credit market is expected to remain buoyant, driven by ongoing economic recovery and strong demand for personal and corporate loans.
Intense competition among banks for deposits is likely to persist as they seek to support growing credit demand.
Rising interest rates on term deposits are anticipated to further attract depositors, bolstering the overall deposit base.
In conclusion, India's Scheduled Commercial Banks (SCBs) have experienced robust credit growth, with a significant 19.3% year-on-year increase in the final quarter of FY24, reaching a total outstanding credit of Rs. 164.3 lakh crore by March 31, 2024.
This expansion, amounting to Rs. 26.6 lakh crore since March 2023, reflects strong consumer demand, increased lending to NBFCs, and the impact of recent banking mergers.
Urban areas, particularly in the western region, have led the credit surge, driven by corporate investments and improved utilization rates.
Deposit growth, while positive at 13.6% year-on-year, has lagged behind credit growth, reaching Rs. 206.1 lakh crore by March 2024, with term deposits outpacing CASA deposits due to higher interest rates.
Private sector banks (PVBs) have significantly outpaced public sector banks (PSBs) in credit expansion, reporting a robust 27.9% growth and capturing a larger market share.
The recent HDFC merger has played a pivotal role in boosting PVBs' credit growth and overall market presence.
Looking forward, the credit market is expected to remain dynamic, supported by ongoing economic recovery and strong demand for both personal and corporate loans.
Competition among banks for deposits is likely to intensify, driven by the need to fund expanding credit portfolios.
Rising interest rates on term deposits are anticipated to attract more depositors, further strengthening the banking sector's deposit base.
Overall, the outlook for India's banking sector is optimistic, with continued growth in credit activities and strategic initiatives driving financial stability and market expansion.
