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Growth in Bank Loans Outpace deposits to increase

September 12, 2023

Growth in Bank Loans Outpace deposits to increase
Bank credit registered a faster growth compared to deposits during the first five months of the current fiscal year, the Reserve Bank of India data has revealed. According to the RBI data, bank credit reported a growth of 9.1 per cent to ₹124.5 lakh crore during the April to August period in 2023. On the other hand, bank deposits grew by 6.6 per cent to ₹149.2 lakh crore during the period. 

Owing to the growth in bank credit, bank deposit rates are also expected to increase in the coming months, with the weighted average term deposit rates gaining 27 basis points in the first five months of the current financial year. Notably, the banks’ weighted average term deposit rate increased to 6.55 per cent in July, up from 6.28 per cent in April.
 
The data takes into account the merger of HDFC with HDFC Bank, which further increased the gap between credit and deposit as the deposits of the housing finance company were lower than it’s loans, reported Times of India. 
 
Further, the report stated that banks have added ₹11.9 lakh crore worth of deposits in absolute terms, whereas the loan books have seen an increase of ₹12.4 lakh crore. The gap between credit and deposit growth has been balanced to an extent due to the increase in investments by banks in government securities. CareEdge Ratings explained that the current fiscal year is expected to witness a credit growth of 13 to 13.5 per cent, if the impact of the HDFC merger is not taken into account. 
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