Banks deposits soar 16% but credit fails to grow

The Reserve Bank of India (RBI) on Wednesday released quarterly performance of deposits and credit growth of Scheduled Commercial Banks (SCBs)  as on December 31, 2016. 

Data compiled by RBI stated that aggregated deposits among all SCBs stood at 16.4% as on December 2016, which is higher compared to 12.9% growth recorded in September 2016 quarter. 

SCB's credit growth decelerated to 7% in the period, compared to 12.1% growth in September 2016. 

RBI said, "On a year-on-year (y-o-y) basis, aggregate deposits grew at an accelerated pace in all population groups (except in metropolitan areas) and for all bank groups; on the other hand, however, bank credit decelerated across all population groups and bank groups."

Since the ban of 86% of currency notes in India on November 8, loan growth remains soft, while deposit growth continue to surge.

Nitin Aggarwal, Renish Patel analysts of Antique Stock Broking on an earlier occasion said, " We expect credit growth to remain in single digit for FY17 (10% y-y growth in FY16) as capex cycle remains subdued while the demonetisation activity may further put pressure on industrial demand in the near term."

A survey was carried out by the central bank across seven states namely - Maharashtra, National Capital Territory (NCT) of Delhi, Tamil Nadu, Karnataka, Uttar Pradesh, West Bengal and Gujarat which said term deposits constituted highest share in aggregate deposits among all population groups, except in rural areas where savings deposits 53.4% recorded the major share.

Public sector banks (PSBs) once again maintained its lead, accounting for 70.6% of aggregate deposits and 66.2% of total bank credit.

Metropolitan bank branches contributed 51.6%  in the aggregate deposits and 65.6% under total bank credit. 

With this, credit-deposit (C-D) ratio of all SCBs at all-India level came down to 70.6% by end-December 2016 from 74.5% a quarter ago. 

CD ratio means how much a bank lends out of the deposits it has mobilised. 

Among the states the  CD ratio were - Maharashtra (106.5%), Tamil Nadu (100.8%), Chandigarh (100.0%), Telangana (96.7%), Andhra Pradesh (91.4%) and NCT of Delhi (84.5%).