The share of low-cost current and saving deposits (CASA) in total deposits has largely bottomed out in the 39-40 per cent range in a steady decline from about 44 per cent in 2021-22, according to RBI’s latest monthly bulletin.
“This is likely to squeeze banks’ net margins going forward and prompt repricing of deposit books.
“In fact, banks have been impelled to increase mobilisation of funds through certificates of deposits (CDs) in June ahead of the quarter end. Mutual funds are the main mobilisers of funds for investment in CDs,” RBI officials said in the article “State of the Economy”.
CD issuance
In the primary market, fund mobilisation through issuances of CDs gained momentum in May-June following a slack in April.
Banks issued CDs worth ₹2.65-lakh crore during 2024-25 (up to June 28), which was higher than ₹1.45-lakh crore in the corresponding period of the previous year, per the article.
A decline in short-term rates in June prompted banks to increase CD issuances to meet funding gaps.
Issuances of commercial papers (CPs) totalled ₹3.8-lakh crore during 2024-25 (up to June 30) were similar to activity in the segment during the corresponding period of the previous year
Credit growth
Scheduled commercial banks’ (SCBs’) credit growth declined from 15.5 per cent in the previous fortnight to 13.9 per cent as of June 28, 2024 (16.2 per cent a year ago)
SCBs’ deposit growth (excluding the impact of the merger of HDFC with HDFC Bank), which recorded an increase in the wake of withdrawal of ₹2,000 banknotes, has remained in double digits since April 2023, the officials said.
As of June 28, 2024, the system-level incremental credit-deposit ratio was 101 per cent. With the statutory requirements for cash reserve ratio (CRR) and statutory liquidity ratio (SLR) at 4.5 per cent and 18 per cent, respectively, around 77 per cent of deposits were available with the banking system for credit expansion as of June 28, 2024.
The deposit base was supplemented by CD issuances.