Bank credit seems to be catching up to deposit growth, going by the Reserve Bank of India’s (RBI) data.

The advances of all scheduled banks increased by ₹31,692 crore in the fortnight ended July 30. Deposits during the reporting fortnight were up ₹33,886 crore.

With the increase in advances, banks’ outstanding investment in Central and State government securities came down by ₹13,514 crore, as per RBI’s “Scheduled Banks’ Statement of Position in India”.

Also read: Public sector banks report sharp slippages in MSME loans in Q1

The advances portfolio of all scheduled banks declined by ₹49,490 crore in the previous fortnight ended July 16, 2021. However, deposits swelled by ₹63,398 crore.

Expert’s view

Vidya Shankar, Principal Director (Ratings), and Hemant Sagare, Senior Manager (Ratings), Brickwork Ratings (BWR), observed in a report that the measures of the government and RBI have always been proactive in enhancing credit growth to support the business cycle across segments.

“While advances to the industry continue to grow slowly, measures including vaccination and the unlocking of services will surely assist in its revival, with supportive measures from the regulator for this segment as well. The business community also seems to be better prepared to accept the pandemic and resume their business activities under the ongoing pandemic scenario,” the authors said.

Also read: SFBs mull transitioning into universal banks

Considering the existing asset quality levels, a likely increase is expected over the medium term. However, BWR is of the view that maintaining healthy capitalisation levels shall assist the appetite of banks for enhancing their credit risk.