bank-credit-slows-as-deposits-shift-to-higher-returns

Bank credit and deposit growth slowed in the October-December quarter, according to Reserve Bank of India data released on Friday. Bank credit growth on a year-on-year basis eased to 11.8 per cent in December 2024, down from 12.6 per cent in September 2024.

 

Aggregate deposits also expanded at a slower pace, growing 11 per cent compared to 11.7 per cent in the previous quarter.

 

Personal loans, which make up a significant 31.5 per cent share of total credit, saw a moderation in annual growth to 13.7 per cent, down from 15.2 per cent in the preceding quarter.

 

Credit to the agriculture and industry sectors also showed signs of slowing, while lending to trade, finance and professional services picked up during the third quarter of the 2024-25 financial year.

 

Lending to public sector organisations saw an increase, rising to 5.4 per cent growth in December 2024 from 0.3 per cent in the previous quarter.

 

The share of public sector lending in total credit stood at 13.6 per cent. The central bank noted that over half of the total loan amount carried interest rates between 8 and 10 per cent, while nearly 16 per cent of loans had interest rates below 8 per cent. The remaining loans carried interest rates of 10 per cent or higher.

 

The RBI’s data on deposits with scheduled commercial banks showed that term deposits grew 14.3 per cent year-on-year in December 2024, significantly outpacing the 5.1 per cent growth in savings deposits.

 

As a result, the share of term deposits in total deposits increased to 62.1 per cent, up from 60.3 per cent a year earlier.

 

The share of deposits bearing interest rates of seven per cent or more in total term deposits rose to 70.8 per cent in December 2024, compared to 61.4 per cent a year earlier.

 

The central bank highlighted that with the rise in returns on term deposits, nearly 79.8 per cent of the incremental term deposits mobilised between April and December 2024 were placed in the original maturity bucket of one to three years.

 

On an outstanding basis, over two-thirds of total term deposits were in this maturity category, with another 11 per cent having a longer original maturity.

 

During the April-December 2024 period, 56.1 per cent of total term deposits were valued at ₹1 crore or more. Meanwhile, senior citizens accounted for 20.2 per cent of total deposits in December 2024.