Credit growth up by 19.3%, crosses deposit growth; PVBs outpace PSBs: CareEdge

The Scheduled Commercial Banks (SCBs) in India have reported a significant increase in credit offtake, with a year-on-year (y-o-y) growth of 19.3 per cent for the last quarter of FY24, according to CareEdge report.This growth translates to an absolute expansion of Rs 26.6 lakh crore since March 2023, reaching a total outstanding credit of Rs 164.3 lakh crore as of March 31, 2024.

The primary drivers behind this surge include a substantial rise in personal loans and increased lending to Non-Banking Financial Companies (NBFCs), alongside the impacts of recent mergers. The report says this reflects strong consumer demand and robust lending activities.

The urban segment gained market share, indicating a rising demand for credit in metropolitan areas driven by corporate capex and increased utilisation rates.

The western region outperformed other regions, registering a y-o-y growth of 20.4 per cent in credit offtake, highlighting the region's robust economic activities.

The central region reported the highest credit growth of 21.6 per cent, reaching Rs 15.1 lakh crore.

The southern and northern regions also showed strong performances, with growth rates of 19.8 per cent and 16.6 per cent respectively.

However, deposits grew at a slower pace compared to credit, with a y-o-y increase of 13.6 per cent, amounting to Rs 24.7 lakh crore, reaching a total of Rs 206.1 lakh crore by the end of March 2024.

The metropolitan region led deposit growth at 14.7 per cent y-o-y, indicating a steady influx of funds from corporates and high-net-worth individuals.

Term deposits outpaced Current Account and Savings Account (CASA) deposits, with a y-o-y growth of 18.8 per cent, driven by higher interest rates.

The credit to deposit (CD) ratio saw a significant rise, increasing by 380 basis points (bps) to 79.7 per cent as of March 2024, driven by the higher credit growth and impacts of mergers within the banking sector.

Private sector banks (PVBs) reported a strong credit growth of 27.9 per cent, capturing a larger market share of 41.8 per cent, a 282 bps increase y-o-y.

Public sector banks (PSBs) reported a credit growth of 13.6 per cent y-o-y, expanding by Rs 10.5 lakh crore to Rs 87.6 lakh crore in Q4FY24.

The recent HDFC merger played a pivotal role in boosting the credit growth of private sector banks, contributing significantly to their market share expansion.

Even excluding the merger effects, PVBs showed robust growth, with an approximate y-o-y increase of 14.7 per cent in credit.

The Weighted Average Lending Rate (WALR) for Schedule Commercial Banks (SCBs) rose by 11 bps, reaching 9.83 per cent in March 2024, reflecting the tightening monetary policies.

The Weighted Average Domestic Term Deposit Rate (WADTDR) also saw an increase, up by 72 bps to 6.88 per cent from the previous year, enhancing the attractiveness of term deposits.

The western region's substantial economic growth contributed to its leading position in credit expansion, accounting for 34 per cent of the total credit as of March 31, 2024.

The urban and semi-urban areas reported healthy deposit growth at 13 per cent, while the metropolitan areas continued to dominate, gaining a market share of 55.2 per cent.

The credit market is expected to remain buoyant, driven by the ongoing economic recovery and strong demand for personal and corporate loans.

The intense competition among banks for deposits is likely to continue, as they aim to secure sufficient funds to support the growing credit demand.

The rising interest rates on term deposits are anticipated to further attract depositors, enhancing the overall deposit base. 

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