Credit offtake increased by 19.8% YoY and showed a sequential improvement of 0.8% for the fortnight ended September 08, 2023. This surge continues to be primarily driven by the impact of HDFC’s merger with HDFC Bank as well as growth in personal loans, said rating agency firm CareEdge Ratings in its latest report.
If merger impact is excluded, the agency said the credit grew at a lower rate of 15.1% YoY fortnight compared to last year. In absolute terms, over the last twelve months, credit offtake expanded by ₹24.6 lakh crore to reach ₹150.4 lakh crore as of September 8, 2023.
Going forward, the agency projects a positive outlook for bank credit offtake in FY24, driven by factors like economic expansion and an increased focus on retail credit supported by digitalisation efforts.
The agency estimates a credit growth range of 13.0% to 13.5% for FY24, excluding the impact of the HDFC-HDFC Bank merger. Notably, the personal loan segment is expected to perform well compared to the industry and service segments in FY24.
Furthermore, as the Credit-Deposit ratio remains elevated, growth in the liability franchise would play a significant role in sustaining loan growth, it added.
On the other hand, deposits too witnessed healthy growth, increasing by 13.6% YoY for the fortnight ended September 08, 2023 (including the merger impact). The deposit growth has continued to increase, reaching a 6-year high, said CareEdge.
Without considering the merger, deposits rose by 12.8% YoY. In absolute terms, deposits expanded by ₹23.3 lakh crore and reached ₹193.8 lakh crore as of September 8, 2023, compared to September 9, 2022, the agency added.
Going forward, CareEdge expects deposit growth to improve in FY24 as banks look to shore up their liability franchise and ensure that deposit growth does not constrain the credit offtake.
Meanwhile, the Reserve Bank of India (RBI) on September 08 announced the discontinuation of the Incremental Cash Reserve Ratio (I-CRR) in a phased manner.
On August 10, the RBI mandated banks to maintain an incremental cash reserve ratio (I-CRR) of 10% against the increase in their net demand and time liabilities (NDTL) that occurred between May 19, 2023, and July 28, 2023. This measure was designed to counteract the excess liquidity in the system.
Following a thorough assessment of the prevailing and evolving liquidity conditions, the RBI has decided to release the amounts locked under the I-CRR gradually. This approach is aimed at preventing abrupt shocks to the system's liquidity and ensuring the orderly functioning of money markets.