Bank credit grows at 16.3% to Rs 133.41 trillion, shows RBI data

It had moderated to 14.9 per cent YoY in the fortnight ended December 30 due to base effect, but subsequently picked up as the base effect eased out

Bank credit grew at 16.3 per cent year-on-year (YoY) in the fortnight ended January 27 to Rs 133.41 trillion, latest data by the Reserve Bank of India (RBI) showed, moderating marginally from the growth witnessed till last fortnight (16.5 per cent).

In the fortnight under consideration, credit growth increased by 0.5 per cent or Rs 64,684 crore. It had moderated to 14.9 per cent YoY in the fortnight ended December 30 due to base effect, but picked up subsequently as the effect eased out.

Meanwhile, deposit growth of the banking system came in at 10.5 per cent YoY for the fortnight ended January 27. In the previous fortnight ended January 13, deposit accretion grew at 10.6 per cent YoY.

For the fortnight, deposit accretion saw marginal increase of 0.2 per cent or Rs 44,131 crore.

The credit-deposit growth gap has now contracted to 580 basis points (bps) from over 800 bps earlier but still remains quite high. 

Banks have increasingly hiked deposit interest rates over the past few months to mobilise funds for the high credit growth in the economy as liquidity in the system has moderated. 

“The difference has narrowed, but there is still a difference. It is really up to the banks to mobilise deposits and make up the gap. They are doing so through certificate of deposits and reducing non-SLR investments but they need to mobilise deposits on their own to meet the gap,” Michael D Patra, deputy governor of RBI, had said in the post-policy press conference.

“There is an increase in the deposit side also. The sources of funding we have analysed and we have seen that the sources of funding are coming from deposits as well as the borrowings. The credit-deposit ratio as of now for the sector has increased a little bit, but still reasonable within the range. The liquidity coverage ratio is still at a very comfortable level, much higher than the regulatory prescription of 100 per cent,” said M K Jain, deputy governor, RBI.

Leading banks have signaled that the momentum in credit growth is expected to continue, with the broader capex cycle strengthening.

Credit growth has moderated from the peak of 18 per cent seen in October last year.

Experts believe the persistently high inflation, moderation in overall growth in the economy, high interest rates because of rate hikes undertaken by the central bank may blunt the sharp credit growth going into next financial year.