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Scheduled commercial banks (SCBs) credit growth accelerated further to 14.2% in June 2022 quarter, compared to 6% in the same period a year ago. The growth is also higher than the 10.8% growth recorded in the preceding quarter. On Thursday, RBI released the quarterly performance of banks' deposits and credits. Meanwhile, banks' average deposit growth remained in the range of 9.5-10.2% in the June quarter. Notably, deposits have stayed in the same range for the last five quarters.
On SCBs, RBI's data stated that credit growth (y-o-y) accelerated further to 14.2% in June 2022 from 6% a year ago and 10.8% a quarter ago.
As per RBI, banks' credit growth has been broad-based. All the population groups (i.e., rural, semi-urban, urban, and metropolitan), all the bank groups (i.e., public/private sector banks, foreign banks, RRBs, and SFBs), and all the regions of the country (i.e., central, eastern, north-eastern, northern, southern and western) recorded double-digit annual credit growth in June 2022.
On deposits, RBI revealed that aggregate deposit growth (y-o-y) has remained in the range of 9.5-10.2% during the last five quarters. During the quarter, metropolitan branches continue to account for over half of the bank deposits and their share increased marginally over the last one year.
Further, the share of current account and savings account (CASA) deposits in total deposits has been increasing over the last three years (42%, 43.8%, and 44.5% in June of 2020, 2021, and 2022, respectively).
As credit growth is outpacing deposit growth in the recent period, the credit-deposit (C-D) ratio has been on the rise, RBI said.
In June 2022 quarter, the credit-deposit ratio stood at 73.5% at the all-India level (70.5% a year ago) and 86.2% for metropolitan branches of banks (84.3% a year ago).
Bank credit growth accelerated despite RBI hiking the repo rate by 90 basis points in May and June this year. Generally, in a rate hike scenario, borrowing funds becomes expensive for banks from RBI. This leads to a rise in the cost of funds which makes banks pass on the impact to borrowers' lending rates.
RBI has been hiking the repo rate to tame multi-year high inflation. In May, RBI hiked the rate by 40 basis points, followed by 50 basis points increase in the June policy, and another hike of 50 basis points in the August 2022 policy. Overall, RBI has hiked the repo rate by 140 basis points in three policies which also made a significant upward shift in term loan rates.
Currently, the repo rate is at 5.40%. Also, the standing deposit facility (SDF) rate is at 5.15%, and the marginal standing facility (MSF) rate and the Bank Rate are at 5.65%.
In the August policy, the MPC decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth.