Banks’ deposit accretion outpaces loan disbursals in fortnight-ended May 31

With the credit cycle entering lean season, the banking system seems to be seeing more deposit accretion than loan disbursements, going by latest RBI data.

Typically, the first two quarters are considered lean for credit offtake as monsoon tends weigh on some of the segments of economic activity such as construction, fishing and allied activities, etc.

Moreover, Government spending is expected to pick up only after Finance Minister Nirmala Sitharaman presents “NDA 3.0” government’s first budget next month. This, in turn, could trigger credit demand from the private sector.

In the fortnight ended May 31, all scheduled banks reported net deposit growth of ₹2,71,456 crore against net credit offtake of ₹1,81,386 crore, per RBI data on “Scheduled Banks’ Statement of Position in India”.

The gap continues

The Bank system has seen a mismatch in the credit and deposit growth in the last one year or so, with credit growth outpacing deposit growth. This has prompted banks to raise deposit rates to attract deposits.

In his last monetary policy statement, RBI Governor Shaktikanta Das, said: “The persisting gap between credit and deposit growth rates warrants a rethink by the Boards of banks to re-strategise their business plans. A prudent balance between assets and liabilities has to be maintained.”

Growth concerns

Das noted that in November last year, RBI had flagged certain concerns on excessive growth in the unsecured retail loans and over-reliance of NBFCs on bank funding. Recent data suggests that there is some moderation in these loans and advances.

“We are closely monitoring the incoming data to ascertain if further measures are necessary. The Boards and top management of regulated entities should ensure that risk limits and exposures for each line of business are kept well within their respective risk appetite framework,” the Governor said.