Bank credit growth inflation to 15.1% by July, deposits lag: RBI

According to the RBI, growth in credit card outstanding slowed to 22 percent to Rs 2.75 lakh crore from 32.4 percent a year ago.
Non-food bank credit is projected to grow 15.1 percent by July 2024 to Rs 162.92 lakh crore by July 2024, compared to 14.7 percent a year ago, according to the latest RBI data.
However, RBI data showed that banks’ deposit growth slowed by 11.3 percent to Rs 213.28 lakh crore. With deposit growth slowing, banks are racing to raise funds through special deposit schemes and other innovative schemes to meet the credit demand in the system. Many banks have reported a decline in deposits during the quarter ending June 2024 as customers are now looking at alternative avenues such as capital markets to park their funds for better returns.
Credit to agriculture and allied activities remained strong at Rs 21.55 lakh crore in July 2024, with a growth of 18.1 percent compared with 16.7 percent a year ago, the RBI said.
Credit growth to industry accelerated to 10.2 per cent to Rs 37.05 lakh crore in July 2024 compared to 4.6 percent in July 2023. Among key industries, chemicals and chemical products, food processing, petroleum, coal products and nuclear fuel and credit to infrastructure recorded higher growth in July 2024 compared to a year earlier, while basic metals and metal products, the RBI said. And loan to clothing decreased.
The central bank said credit growth to medium industries increased by 17.2 percent to Rs 3.17 lakh crore and to large industries by 8.5 percent to Rs 26.74 lakh crore.
Credit growth to the services sector slowed to 15.4 percent in July 2024 from 19.7 percent a year ago, mainly due to relatively lower credit growth to non-banking financial companies (NBFCs) and trade sectors. Credit growth accelerated to commercial real estate, tourism, hotels and restaurants and computer software during July 2024, the RBI said.
However, personal loan growth slowed by 17.8 percent to Rs 51.39 lakh crore in July 2024 compared to 18.4 percent a year ago, mainly due to deceleration in growth recorded in other personal loans and vehicle loans. However, credit growth to housing, the largest component of the sector, accelerated.
According to the RBI, growth in credit card outstanding slowed to 22 percent to Rs 2.75 lakh crore from 32.4 percent a year ago.
Non-food bank credit (NFBC) growth may slow to Rs 19.0-20.5 lakh crore (11.6-12.5 per cent) in FY2025 from Rs 22.3 lakh crore (16.3 per cent) in FY2024. Incremental deposit growth is expected to decline to Rs 19.4-20.0 lakh crore in FY2025 (9.5-9.8 per cent YoY). Rs 23.2 lakh crore in FY2024 (12.9 percent YoY).
With credit growth outpacing deposit growth, the CD ratio reached an all-time high of 78.0 percent (80.2 percent including the impact of HDFC merger) over the last five years to March 2024. Subsequently, following the regulator’s prompting to banks to reduce their CD ratio, with a marginal decline to 77.1 percent by June 2024, the incremental CD ratio is further reduced to 60 percent by Q1FY25, ICRA said.
Banks are expected to see a reduction in their credit growth targets in the wake of the proposed implementation of the revised LCR norms from April 1, 2025, resulting in an improvement (decline) in CD ratios and an increase in liquidity buffers.