Gap between deposit and credit growth continues to be wide: RBI data

Deposits of all scheduled banks declined in the reporting fortnight ended August 23 even as their advances recorded a robust growth, indicating that the gap between their growth continues to be wide.

Deposit growth of all scheduled banks has been lagging credit growth in the last few quarter, with the former de-growing by ₹5860 crore and the latter expanding by ₹66,655 crore in the reporting fortnight, per RBI data.

Given the asymmetrical growth in deposits and credit, Banks are considering developing innovative products to win back depositors, who have parked money in alternative investments. Mutual funds and equity markets are currently offering better returns than banks deposits.

Bankers’ cautioned investors about the risk of losing money should markets correct from the current highs. They emphasised that deposits ensure safe and periodic returns.

Referring to latest RBI data, in his address at the FICCI-IBA conference on Thursday, Governor Shaktikanta Das said bank credit to agriculture and allied activities remained robust and increased by 18.1 per cent (year-on-year/y-o-y).

Credit to industry surged by 10.2 per cent (y-o-y) in July 2024 as compared to 4.6 per cent in July 2023. Within industry, credit to MSMEs also grew at 14.4 per cent (y-o-y).

Bank credit to industries such as chemicals and chemical products; food processing; petroleum, coal products and nuclear fuels; and infrastructure has been quite strong in July 2024.

Das opined that the enhanced credit flow to industry along with an all-time high-capacity utilisation points to an upturn in the investment cycle, as reflected in the NSO data.