Credit growth of scheduled commercial banks (SCBs) rose to 14.2% in the June 2022 quarter, as against 6% in the same period a year ago. This growth is also higher than the growth of 10.8% recorded in the previous quarter. The RBI on Thursday released the quarterly performance of deposits and credit of banks. Meanwhile, average deposit growth of banks in the June quarter ranged in the range of 9.5-10.2%. Notably, deposits have remained in the same range for the last five quarters.
On SCBs, RBI data states that credit enhancement (Y-o-Y) increased to 14.2% in June 2022 from 6% a year ago and 10.8% a quarter ago.
According to reserve Bank of IndiaCredit growth of banks has been broad-based. All population groups (ie, rural, semi-urban, urban and metropolitan), all bank groups (ie, public/private sector banks, foreign banks, regional rural banks and SFBs), and all regions of the country (ie, central, Eastern, North-Eastern, Northern, Southern and Western) registered double-digit annual credit growth in June 2022.
On deposits, RBI disclosed that the overall deposit growth (Y-o-Y) during the last five quarters has been in the range of 9.5-10.2%. During the quarter, metropolitan branches continued to account for more than half of bank deposits and their share increased marginally over the past year.
Moreover, the share of current account and savings account (CASA) deposits in total deposits has been increasing in the last three years (42%, 43.8% and 44.5% in June of 2020, 2021 and 2022, respectively).
As credit growth has been outpacing deposit growth in the recent period, the credit-deposit (CD) ratio has been rising, the RBI said.
In the June 2022 quarter, the credit-deposit ratio at the all-India level stood at 73.5% (70.5 per cent a year ago) and 86.2% for metropolitan branches of banks (84.3 per cent a year ago).
Bank credit growth picked up despite the 90 basis points hike in the repo rate by the RBI in May and June this year. Generally, in a rate hike scenario, it becomes costlier for banks to borrow from RBI. This increases the cost of funds thereby affecting the lending rates of the banks to the borrowers.
The RBI is increasing the repo rate to overcome the multi-year high inflation. In May, the RBI raised the rate by 40 basis points, followed by a 50 basis points increase in the June policy, and another 50 basis points increase in the August 2022 policy. Overall, the RBI has hiked the repo rate by 140 basis points in three policies, leading to a significant change in term loan rates as well.
At present the repo rate is 5.40%. In addition, the Permanent Deposit Facility (SDF) rate is 5.15%, and the Marginal Standing Facility (MSF) rate and the Bank Rate are 5.65%.
In the August policy, the MPC decided to focus on the return of housing to ensure that inflation remains within the target while supporting growth.
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