After nearly 30 months, banks' deposit growth has edged above credit expansion, potentially signaling an end to a period when the reverse was in operation.
Growth in credit staying ahead of growth in deposits had prompted the Reserve Bank of India (RBI) to encourage banks to adopt innovative strategies to get more funds and narrow the gap between the two.
However, the alignment of deposit growth with credit expansion can largely be attributed to a decline in credit growth from its previous highs.
Having said that, deposit mobilization by banks, especially those in the private sector, has picked up pace following the nudge from the regulator.
According to the latest data from the Reserve Bank of India (RBI), deposits in banks grew 11.74 per cent year-on-year (Y-o-Y) during the fortnight ended October 18 to ₹218.07 trillion while credit growth during the same period came in at 11.52 per cent Y-o-Y to ₹172.38 trillion.
"This is in line with expectations, although it is likely occurring faster than anticipated. Incremental credit growth this financial year has been lower than last year, particularly due to a slowdown in credit to the services sector, which is contributing to the alignment of credit and deposit growth," said a senior economist.
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