The belief that the growth of deposits in India banking The fact that the sector is in decline is a statistical myth and concerns on the issue are unwarranted, according to a recent report by the State Bank of India (OSE).
News agency ANI, citing the SBI report, said the banking sector, which includes all scheduled commercial banks (ASCBs), registered the highest absolute growth. growth both in deposits and loans since 1951-52 as of fiscal year 2023.
Bank deposits stood up for ₹15.7 lakh crore and credit expanded in ₹17.8 lakh crore, boosting the incremental credit deposit (CD) rate to 113 per cent. The momentum continued into FY24, with deposits increasing by ₹24.3 lakh crore and credit for ₹27.5 lakh crore, the report said.
Despite the narrative of the decelerate As for deposit growth, the data tells a different story. Incremental deposit growth has outpaced incremental credit growth, as deposits increased ₹61 trillion, compared to ₹59 trillion in credit, starting from fiscal year 2022, ANI cited the report.
“Decennial deposits have expanded by a marked 2.75 times, but decennial credit expanded by 2.8 times since FY22, deposits expanded ₹61 trillion in terms of credit expansion in ₹59 billion,” he said.
“The myth of declining deposit growth appears to be simply a statistical myth, with credit growth outstripping deposit growth. growth “This is being touted as a slowdown in deposit growth,” the report said.
According to a study by the Reserve Bank of India (Reserve Bank of India), the Indian banking regulator, in June 2024, is in its 26th month of this divergence, with expectations indicating that the cycle will likely end between June and October 2025, the news agency said. The study also highlighted that once the divergence ends, deposit growth is expected to pick up, while credit growth may slow down, indicating the beginning of a rate reversal cycle and a possible slowdown in the economy.
CASA deposit trend:
The SBI report also highlighted that HOME Current account deposits (Savings Accounts) fell to 41 percent in fiscal year 2024, compared to 43.5 percent in the previous year, due to the decrease in deposits in savings accounts.
The decline in savings account deposits is closely aligned with pre-COVID-19 pandemic levels of 42 percent and shows a shift in how deposits are used, the report said.
The stability of savings Bank deposits are a cause for concern as they are mainly used for transactional purposes, which creates more turnover in the banking system.
Higher returns Term deposits are driving a shift in bank deposits as term deposits rose to 59 per cent in FY24, compared to 56.5 per cent in the previous year, while CASA deposits continue to decline. The SBI report sees this as a natural response to the rising interest rate environment as funds shift from low-interest CASA accounts to higher-yielding term deposits, the news report said.
The report also said the myth of declining deposit growth may continue, but deposit growth continues. strongand term deposits are gaining a larger share as interest rates rise, the news agency said.
Finance Minister Nirmala Sitharaman will hold a review meeting with heads of public sector banks and regional rural banks on August 19.
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