Incremental credit-deposit ratio of banks slides to 63.7% in Q1FY24
The credit incremental deposit (C/D) ratio of all scheduled banks declined to 63.70 percent in the first quarter (Q1) of FY24 from 100.32 percent in the year-ago quarter on the back of deposit growth outpacing credit growth.
Bank credit and deposits in Q1 FY24 grew by Rs. 7,16,738 crores (Q1 FY23 Rs. 4,90,115 crores) and by Rs. 11,25,043 crores (4,88,541 crores). Rs), respectively, according to the latest RBI statement “Statement of Status of Scheduled Banks in India”.
The credit-to-deposit ratio indicates how much of every rupee of deposits increased by the bank goes towards the credit markets.
An additional CD in the report quarter of 63.7 per cent indicates that for every Rs 100 new deposit filled by the banks, they extended new credit amounting to Rs 63.70, with a balance of Rs 36.30 in investments.
Banks are seeing strong accumulation of deposits as they continue to offer high interest rates even with inflows on the Rs 2,000 note withdrawal account.
credit growth
CARE Ratings, in a recent report, notes that credit growth continues to be driven by higher lending to non-bank finance companies, growth in personal loans, and agricultural and allied activities.
The outlook for bank credit cuts continued to be positive due to economic expansion, higher capital spending, implementation of the PLI (production-linked incentives) plan, and retail credit push. The agency said that this growth will come from a high base in FY23, which will marginally affect the growth rate.
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CARE Ratings estimates credit growth to be in the range of 13% – 13.5% for FY24 excluding the impact of HDFC merger with HDFC Bank.
If we include consolidation, growth is likely to be about 3 percent higher. The personal loan sector is expected to continue to perform well compared to the industrial and service sectors in FY24,” according to the agency.