Bank credit growth slows to 11% from over 20% in year – Times of India

MUMBAI: Bank credit growth has slowed to 11.1% as of Nov 15, 2024 compared to 20.6% last year.
Even after adjusting for the HDFC-HDFC Bank merger, growth remains slower at 12.4% versus 16.2% in 2023. There has also been a slowdown in deposit growth, albeit to a lesser extent. Compared to 13.6% deposit growth in the 12 months leading to Nov 15, 2023, the year-on-year deposit growth as of Nov 15, 2024 stood at only 11.2%.
Aggregate deposits of the banking system stood at Rs 218.5 lakh crore, a 6.7% increase over end-March numbers, RBI data showed. Banks have added over Rs 13.8 lakh crore of deposits between April-Nov 15, 2024. The year-to-date deposit growth is slower than last year’s 8.9%, when banks had added another Rs 16.1 lakh crore in the first seven and a half months of FY25.
Total bank loans stood at Rs 173.6 lakh crore as of Nov 15. Banks have added Rs 9.3 lakh crore of fresh loans in FY25 compared to Rs 19.5 lakh crore in the year-ago period. Even without the HDFC impact, the increase in advances last year was Rs 13.6 lakh crore.
“Overall, credit growth has slowed from 16% last year to around 11% now. We believe credit growth drives GDP and not the other way around. SBI economists’ Granger causality test results for GDP and credit data from 1990 show a one-way causal relationship between GDP and credit, with increased credit leading to higher GDP,” Suresh Ganapathy, research analyst with Macquarie, said.
With bank deposit growth slower than the rise in deposits, banks have begun liquidating their govt bond portfolio. The outstanding stock of govt securities with RBI has dipped by Rs 67,431 crore to Rs 64.4 lakh crore in the fortnight ended Nov 15.
“Everything is slowing… earlier, only unsecured loans were slowing… Now, the slowdown is spreading even to secured segments. Mortgage growth is down from 18% to 12%, auto loans – which includes all kinds of vehicle loans – are down from 20% last year to 11%, unsecured loan growth running at 25%+ last year is now down to 11%,” Ganapathy said, quoting sectoral data on bank credit as of Oct end.
In recent years, retail lending and loans to non-bank financial institutions have been a big driver of bank credit. However, growth in retail bank credit has eased from 16.3% in March 2024 to 13.4% in Sept and even further to 12.9% in Oct. Bank loans to NBFCs have shrunk by 0.7% to Rs 1.5 lakh crore during the first seven months of the financial year.