Banks end FY23 with a robust 15.4 pc credit growth: RBI Data

Robust credit growth in FY23 driven by personal loans, services sector, and agriculture:

Scheduled commercial banks (SCBs) reported a robust credit growth of 15.4% in FY23 compared to 9.7% in FY22. The growth was powered by personal loans, loans to the services sector, and agriculture and allied activities. Personal loans registered a growth of 20.6% in FY23 as compared to 12.6% in the year-ago period, primarily driven by housing loans, according to RBI data on sectoral deployment of bank credit.

Bank credit and deposit growth lost steam in the last fortnight of FY23 compared to the year-ago period, even as overall growth under these two key parameters was robust in the reporting financial year as compared to FY22.

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Slow deposit growth expected due to rising deposit rates and competition between banks:

Deposit growth witnessed a slower growth at 9.6% y-o-y compared to credit growth for the fortnight ended March 10, 2023. Deposit rates have already risen and are expected to go up even further due to elevated policy rates, intense competition between banks for raising deposits to meet strong credit demand, a widening gap between credit & deposit growth, and lower liquidity in the market. The short-term Weighted Average Call Rate (WACR) has reached 6.78% (as of March 3, 2023).

Strong credit offtake driven by personal loans, NBFCs, and higher working capital requirements due to inflation:

Credit offtake rose by 15.0% y-o-y for the fortnight ended March 24, 2023, compared to 9.6% from the same period in the last year (reported March 25, 2022). Sequentially, it increased by 0.9% for the fortnight. In absolute terms, credit outstanding stood at Rs.136.8 lakh crore as of March 24, 2023, rising by Rs.17.8 lakh crore from March 2022. The credit growth has been robust in FY23 driven by lower base of the last year, unsecured personal loans, housing loans, auto loans, higher demand from NBFCs, higher working capital requirements due to elevated inflation from select industries and depreciation of Indian Rupee (INR).

Credit offtake at 11-year high, despite rising interest rates and global uncertainties:

Credit offtake at 15% for FY23 stood at an 11-year high (year-end numbers) and has overcome the Covid-induced lag relative to deposit growth. Additionally, it has remained robust even amid the significant rise in interest rates, and global uncertainties related to geo-political, and supply chain issues. The growth has been broad-based across the segments. Personal Loans and NBFCs have been the key growth drivers for FY23.

Deposit growth and Credit to Deposit (CD) ratio:

Deposits stood at Rs.180.4 lakh crore for the fortnight ended March 24, 2023, registering a growth of 9.6% y-o-y. Time deposits grew by 10.2% y-o-y, while demand deposits rose by 5.2% in the reporting fortnight vs. 8.6% and 11.4% y-o-y, respectively, reported in the fortnight ended March 25, 2022. Meanwhile, in absolute terms, bank deposits have increased by Rs.15.8 lakh crore from March 2022. It also increased by Rs.0.85 Lakh crore from the immediate previous fortnight (reported March 10, 2023).