Financial institution credit score progress slows to 11% from over 20% in yr – Instances of India

MUMBAI: Financial institution credit score progress has slowed to 11.1% as of Nov 15, 2024 in comparison with 20.6% final yr.
Even after adjusting for the HDFC-HDFC Financial institution merger, progress stays slower at 12.4% versus 16.2% in 2023. There has additionally been a slowdown in deposit progress, albeit to a lesser extent. In comparison with 13.6% deposit progress within the 12 months resulting in Nov 15, 2023, the year-on-year deposit progress as of Nov 15, 2024 stood at solely 11.2%.
Combination deposits of the banking system stood at Rs 218.5 lakh crore, a 6.7% improve over end-March numbers, RBI information confirmed. Banks have added over Rs 13.8 lakh crore of deposits between April-Nov 15, 2024. The year-to-date deposit progress is slower than final yr’s 8.9%, when banks had added one other Rs 16.1 lakh crore within the first seven and a half months of FY25.
Whole financial institution loans stood at Rs 173.6 lakh crore as of Nov 15. Banks have added Rs 9.3 lakh crore of contemporary loans in FY25 in comparison with Rs 19.5 lakh crore within the year-ago interval. Even with out the HDFC influence, the rise in advances final yr was Rs 13.6 lakh crore.
“Total, credit score progress has slowed from 16% final yr to round 11% now. We imagine credit score progress drives GDP and never the opposite means round. SBI economists’ Granger causality take a look at outcomes for GDP and credit score information from 1990 present a one-way causal relationship between GDP and credit score, with elevated credit score resulting in larger GDP,” Suresh Ganapathy, analysis analyst with Macquarie, mentioned.
With financial institution deposit progress slower than the rise in deposits, banks have begun liquidating their govt bond portfolio. The excellent inventory of govt securities with RBI has dipped by Rs 67,431 crore to Rs 64.4 lakh crore within the fortnight ended Nov 15.
“Every thing is slowing… earlier, solely unsecured loans have been slowing… Now, the slowdown is spreading even to secured segments. Mortgage progress is down from 18% to 12%, auto loans – which incorporates every kind of auto loans – are down from 20% final yr to 11%, unsecured mortgage progress operating at 25%+ final yr is now all the way down to 11%,” Ganapathy mentioned, quoting sectoral information on financial institution credit score as of Oct finish.
In recent times, retail lending and loans to non-bank monetary establishments have been a giant driver of financial institution credit score. Nevertheless, progress in retail financial institution credit score has eased from 16.3% in March 2024 to 13.4% in Sept and even additional to 12.9% in Oct. Financial institution loans to NBFCs have shrunk by 0.7% to Rs 1.5 lakh crore throughout the first seven months of the monetary yr.