Indian banks’ deposit growth rate reached its highest in over two months in September this year, driven primarily by innovative schemes and strategies to attract more deposits through higher interest rates.
Key highlights of RBI data: As of September 20, 2024, the deposit growth rate was 11.34%, showing a notable increase compared to 10.96% on September 6. In contrast, the deposit growth rate on June 28, 2024 was 12.55%. Based on Reserve Bank of India (RBI) data, it fluctuated between 10.64 per cent and 11.09 per cent between July 12 and September 6. Credit growth remains steady
While deposit growth soared, credit growth remained relatively stable, hovering around 13% over the period.
Quarterly results accelerate deposit growth
The bank’s performance data highlighted higher annual deposit growth in the second quarter (Q2 FY25) compared to the first quarter (Q1 FY25). Below are the main comparisons.
Bank of Baroda: Global deposits grew by 9.11% in Q2FY25 from 8.83% in Q1FY25. Domestic deposits grew by 7.14% in Q2 FY25 compared to 5.25% in Q1 FY25. Union Bank of India: Total deposits grew by 9.17% in FY20. IDFC First Bank: Loans and advances increased from Rs 1,83,236 crore as on September 30, 2023 to Rs 2,22,188 crore after one year. The annual growth rate was 21.3 percent. During the same period, customer deposits surged 32.2 per cent from Rs 1,64,726 crore to Rs 2,17,738 crore. HDFC Bank: Preliminary results show loan volumes grew by 7 per cent year-on-year and 15 per cent year-on-year. Analyst outlook for Q2 FY25: Loan growth: JM Financial analysts expect loans to grow 14.4% year-on-year, with private banks expected to grow 14.7% and state-owned banks 13.9%. It is. Deposit growth: Deposits are expected to grow at 11.2% on an annual basis, with private banks expected to grow at 15.3% and public sector banks at 9.0%. The gap between deposit growth and credit growth is widening. This mismatch could lead to imbalances in the banking financial system and has drawn concern from both governments and central banks. Central bank response: To address this issue, the central bank urged banks to prioritize deposit mobilization. Lenders are encouraged to consider innovative products and services to attract more deposits and balance deposit-credit ratios. Addressing the challenge of deposit growth
RBI Deputy Governor M. Rajeshwar Rao, in his address at the 2024 IADI Asia Pacific Regional Committee International Conference, emphasized the need for banks to manage deposit growth risk. He said the demand for higher deposit coverage rates and risk-based premium mechanisms could strengthen the financial robustness of deposit insurers and ensure better adaptability to changing financial conditions. emphasized.
Important points:
Deposit growth surges: Bank deposit growth in September was the highest in more than two months, driven by innovative products and higher interest rates. Stability of credit growth: Credit growth remained stable at around 13%, while deposit growth was higher in 2QFY25 compared to the previous year. First quarter of 2025. Deposit-credit gap: Banks continue to face the challenge of balancing deposit and credit growth, and the RBI is pushing for innovative solutions to attract more deposits.
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