Banks’ deposit mobilisation efforts, including by offering higher interest rate on 1-2 years tenor, seems to be bearing fruit, going by the latest RBI data on scheduled banks’ statement of position in India.
In the reporting fortnight ended October 4, 2024, banks’ deposit mobilisation outstripped credit offtake by a wide margin. It is after a few quarters that deposit growth has decisively outpaced credit growth. This could also help correct the high credit-deposit ratio in the banking system.
All scheduled banks’ mopped up deposits aggregating ₹4,20,217 crore against a credit offtake of ₹1,75,363 crore in the reporting fortnight.
Fitch Ratings’ officials, in a report, opined that a widening of the depositor base from the top 15 urban centres could augment inflows and support banks’ deposit retention.
Cumulative policy repo rate
In response to the cumulative policy repo rate hike of 250 basis points (bps) since May 2022, the weighted average domestic term deposit rate (WADTDR) on fresh and outstanding deposits of Scheduled Commercial Banks (SCBs) increased by 243 bps and 190 bps, respectively, during May 2022 to August 2024.
Simultaneously, the weighted average lending rates (WALRs) on fresh and outstanding rupee loans of SCBs have increased by 190 bps and 119 bps, respectively.
CareEdge Ratings’ officials, including Sanjay Agarwal, Senior Director; and Saurabh Bhalerao, Associate Director, in a report said banks are taking further efforts to shore up their liability franchise and ensure that lagging deposit growth does not constrain the credit offtake.
Further, with rate cuts anticipated in the later part of FY25, some amounts might flow back into the banking system thereby improving the CASA (current account, savings account) ratios to a certain extent.