Synopsis: The Indian banking sector has demonstrated strong resilience and growth in loan disbursements and deposits in 2024. According to recent insights from 1Lattice, outstanding loans in India's banking sector rose by around 13% year-over-year (YoY) as of September 2024, marking robust expansion driven primarily by personal loan growth.
Steady Growth in Indian Banking Loans and Deposits:
The Indian banking sector has continued to showcase a substantial upward trend in loan disbursements, indicating strong consumer demand and resilience within the economy.
A recent report by 1Lattice highlights that overall outstanding loans experienced an impressive 13% YoY increase in September 2024, reaching approximately Rs. 172.9 trillion.
This growth is primarily driven by a substantial surge in personal loans, aligning with a shift in Indian banking from corporate to retail lending, a trend that has persisted over the last decade.
The country's banking system has increasingly embraced personal loans, which have fuelled much of the recent credit growth, helping banks manage risks associated with large-scale industrial loans.
Deposit Growth Driven by Rising Interest Rates:
In parallel with loan growth, deposits have also seen a significant increase.
As of September 2024, deposits in scheduled banks have grown by 12% YoY, totalling Rs. 219.2 trillion.
Although there was a marginal 0.4% MoM decline, the overall trajectory suggests strong momentum, partly due to the ongoing rise in interest rates, which makes savings deposits more attractive to consumers.
Notably, the growth in deposits has provided stability to the banking sector, enabling banks to balance their credit expansion with a reliable deposit base.
Digital Payments on the Rise: Non-Cash Retail Transactions Boom:
In addition to loan and deposit growth, non-cash retail transactions have also increased significantly, with a 17% YoY rise in transaction volume recorded in September 2024, amounting to a total of Rs. 73 trillion.
This growth is largely attributed to the increased use of digital payment methods, including the National Electronic Funds Transfer (NEFT) and Unified Payments Interface (UPI).
Together, NEFT and UPI dominated the transaction landscape, handling transactions valued at Rs. 36 trillion and Rs. 20.6 trillion, respectively.
The significant adoption of digital payments underscores the ongoing digital transformation within the Indian economy, with consumers and businesses increasingly preferring cashless modes for their convenience and security.
Historical Growth in Loans and Deposits: A Decade of Expansion:
Looking back over the past decade, India’s banking credit and deposits have grown considerably.
Between fiscal year 2014 (FY14) and fiscal year 2023 (FY23), banking credit expanded more than two-fold from Rs. 60 trillion to Rs. 138 trillion, while bank deposits increased from Rs. 77 trillion to Rs. 187 trillion.
This growth trajectory reflects the Indian economy's rising demand for credit and robust deposit accumulation, as well as the sector’s shift from corporate to retail lending.
As banks continue to focus on personal and retail loans, the credit growth within the Indian banking sector is expected to remain strong, albeit with some caution due to risks associated with non-performing assets (NPAs) in the industrial sector.
In conclusion, the Indian banking sector has demonstrated robust loan and deposit growth, driven primarily by increased demand for personal loans and favourable deposit rates.
This growth is also supported by the surge in digital payment modes, which have transformed transaction habits across the country.
With both public and private sector banks actively contributing to this expansion, the sector is positioned for continued growth despite potential challenges related to industrial NPAs.
Looking ahead, the strong foundation of digital payments and increased retail lending will likely sustain momentum within India's financial landscape.
Disclaimer: This article provides an overview of recent developments in India's banking sector based on data from September 2024. Economic conditions and sectoral performance may vary, and readers are encouraged to consult financial experts for personalized advice.
