Synopsis: Credit offtake in India has shown a significant increase of 9.3% compared to December 2023, reaching Rs. 174.4 lakh crore by November 1, 2024. Meanwhile, deposit growth outpaced credit for the first time in over 30 months, growing by 9.8% and amounting to ₹220.4 lakh crore. Regulatory measures, rising term deposit rates, and evolving market conditions have influenced these trends.
Credit and Deposit Growth Comparison:
India's financial landscape has seen a notable shift as deposit growth surpassed credit expansion in late 2024.
According to a CareEdge Ratings report, this trend marks the first time in over 2.5 years that deposits have outpaced credit.
Credit grew by 9.3% year-to-date, primarily driven by business and retail demand, but was tempered by regulatory measures such as higher risk weights imposed by the Reserve Bank of India (RBI) and Liquidity Coverage Ratio (LCR) requirements.
Simultaneously, deposits recorded a robust 9.8% growth year-to-date, reflecting the impact of rising term deposit rates offered by Scheduled Commercial Banks (SCBs).
This was fuelled by banks' concerted efforts to bolster their liability franchise amid regulatory adjustments.
Liquidity and Market Conditions:
The Weighted Average Call Rate (WACR), a short-term interbank borrowing measure, declined to 6.50% as of November 2024, compared to 6.77% a year earlier.
This drop reflects improved liquidity in the banking sector, providing a conducive environment for both credit and deposit growth.
Sequential Performance:
In fortnightly terms, credit offtake grew by 1.2%, while deposits increased by 1.1%, showing sustained momentum in financial activity.
Over the first 10 months of 2024, credit expanded by ₹14.6 lakh crore, while deposits surged by Rs. 20.6 lakh crore.
This growth trajectory signals the growing reliance on deposits as a stable source of funding for banks.
Sectoral Ratios and Investments:
The credit-to-total-assets ratio saw a modest increase, standing at 71.4%, while government investments accounted for 26.8% of total assets.
Government investments totalled Rs. 65.5 lakh crore, marking a 7.3% year-on-year growth.
In conclusion, the Indian banking sector is navigating a complex yet positive growth environment.
While credit offtake remains robust, deposit growth has demonstrated greater resilience, signalling strengthened confidence in savings and banking systems.
Regulatory policies and market dynamics will continue shaping these trends, highlighting the importance of balancing liquidity and credit expansion.
Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. Readers are advised to consult with financial experts or conduct further research before making decisions based on the insights provided.
