Banks’ deposits grew slower than credit in the week ending April 4, according to the Reserve Bank of India data. Outstanding deposits grew 10% while outstanding credit increased by 10.9% during the fortnight.
Outstanding deposits of banks increased to Rs 236.15 lakh crore as of April 4 from Rs 214.7 lakh crore in the same week previous year. Bank credit reached Rs 188.77 lakh crore from Rs 170.2 lakh in the year-ago period.
Term deposits drove the growth in overall bank deposits, growing 10.4% to Rs 207.83 lakh crore.
The double digit growth in deposits has come after banks intensified efforts to strengthen their liability franchise and have offered higher term deposit rates.
“A combination of liquidity surplus in the system, anticipated monetary easing, and aggressive deposit rate offerings by banks drove this rise in deposit inflows,” said CareEdge Ratings in a report. “Despite an evolving rate-cut environment, several banks offered high interest rates on fixed deposits to boost their deposit base before rates started falling more broadly.”
Credit growth in the banking system has moderated to nearly 11% from nearly 16% witnessed in FY24 due to concerns about asset quality in the unsecured loans segment and elevated credit-deposit (CD) ratio, which eased to 79.6%. Banks struggle for deposit mobilsation is likely to continue this year as interest rates are expect to move downwards with RBI expected to cut rates in the current financial year.