Bank Credit Offtake and Deposit Growth Slow Down in First Half of FY25: RBI Data

Bank Credit Offtake and Deposit Growth Slow Down in First Half of FY25: RBI Data

Bank credit offtake and deposit mobilisation in India have moderated during the first half of the current financial year (H1FY25), compared to the same period last year, according to data released by the Reserve Bank of India (RBI). The slowdown in credit growth has been notably sharper, with year-to-date (YTD) credit growth, as of September 20, 2024, recorded at 4.2%. This marks a significant drop from the 10.8% growth seen during the first half of FY24 (H1FY24).

On a year-on-year (Y-o-Y) basis, bank credit growth declined to 13% by September 20, 2024, compared to a robust 20% a year ago. Similarly, deposit growth has also moderated, slowing to 11.5% from 13.2% in the same period last year.

CRISIL Ratings, in its outlook for the banking sector, has predicted further moderation in bank credit growth for FY25, expecting it to reach 14%, down from approximately 16% in the previous financial year. The slowdown is attributed to a combination of factors, including a slight deceleration in economic growth, which came off a high base of 8.2% in FY24, and revised risk weightings for lending in some of the faster-growing segments.

Despite the moderation, the fundamental drivers of credit demand remain intact, according to CRISIL. However, growth in bank deposits is expected to stay in line with the slower pace of credit expansion. The gap between credit and deposit growth, which stood at 5 percentage points in FY23, is estimated to have narrowed to 3 percentage points in FY24, suggesting a closer alignment between these two key banking metrics.

The RBI data also indicated that the YTD growth in deposits for H1FY25 stood at 5%, compared to 6.9% in H1FY24. This slowdown in both credit offtake and deposit mobilisation indicates a more cautious banking sector in the current financial environment.