Synopsis
This trend has been consistent. Even in the preceding fortnight ended December 8, credit growth stood at 11.5% year-on-year, while deposit growth lagged at 10.2%. The sustained divergence shows continued strong demand for credit amid relatively moderate growth in banks cheapest funding source.
IANSMUMBAI: Bank credit growth continued to outpace deposit mobilisation in December, highlighting a persistent credit-deposit gap in the banking system. For the fortnight ended December 12, bank loans expanded by 11.5% year-on-year, translating into an increase of over Rs 20.18 lakh crore. In comparison, deposits grew at a slower pace of 10.2%, rising by Rs 22.43 lakh crore during the same period.
This trend has been consistent. Even in the preceding fortnight ended December 8, credit growth stood at 11.5% year-on-year, while deposit growth lagged at 10.2%. The sustained divergence shows continued strong demand for credit amid relatively moderate growth in banks cheapest funding source.
In an interview with ET on December 22, SBI chairman CS Setty had said he is optimistic over strong credit growth.
“Our credit growth of 12-14% is primarily driven by RAM – retail, agriculture and MSME – which is 65% of our domestic book and we are uniquely positioned because of the huge runway available internally to support this,” he had said. “Among the large banks in India, probably we have a better scope in growing corporate credit. We achieved around 7% in Q2 and we have visibility of lower double digits this year. We believe once consumption stabilises, corporates will start investing. Demand has been strong for the last two quarters, and Q4 should remain robust as it is a busy season.”
Meanwhile, India’s foreign exchange reserves rose by $4.36 billion to $693.3 billion for the week ended December 19, supported the forex swaps conducted by the Reserve bank of India that week. The reserve also rose due to an increase in foreign currency assets and gold holdings, according to data released by the RBI. Total reserves had stood at $689 billion in the previous week ended December 12. The increase comes amid heightened global volatility and periodic pressures on the rupee, reflecting the RBI‘s efforts to maintain adequate external buffers.
On December 16, the RBI conducted 5 billion USD/INR buy/sell swaps wherein it sold dollars and infused Rs 45,000 crore rupee liquidity into the system.
Foreign currency assets, the largest component of the reserves, increased by $1.6 billion to $559 billion, following a $906 million rise in the preceding week. Gold reserves saw the sharpest jump, rising by $2.62 billion to $110 billion for the week ended Dec 19 compared with an increase of $758 million a week earlier, reflecting valuation gains and the central bank’s diversification of reserve assets.