Bank’s credit deposit ratio to further rise in FY24

The average credit-deposit (CD) ratio of banks is likely to remain higher than 75% in the current financial year, as the credit growth continues to outpace deposits, albeit at a slower pace, industry watchers told FE. According to the latest Reserve Bank of India (RBI) data, banks’ CD ratio rose to 75.8% as on March 24 from 72.22% a year ago.

Krishnan Sitaraman, senior director and deputy chief ratings officer at CRISIL, said when Covid-19 started three years back, for nearly two years, the credit growth was lower on account of lockdowns and subsequent economic slowdown. Banks’ deposit growth, meanwhile, stayed steady at around 9-11% during the period and the CD ratio fell as lenders shored up their liquidity.

However, the economy has since rebounded and there is more demand for credit, Sitaraman said, adding if one looks at the previous three-four quarters, credit growth was outpacing deposit growth. “This fiscal also, I expect the credit growth to be higher than deposit growth, which means the CD ratio is expected to continue to inch up — to what extent though is something we will have to see, but directionally, it will continue to move up. If deposit growth picks up faster, the rise in CD ratio will be lower” he said.

As per Q4FY23 provisional data shared by private banks with the exchanges, IndusInd Bank, YES Bank, Federal Bank and RBL Bank saw the credit growth being higher than deposit growth. while in the cases of HDFC Bank and Bandhan Bank, the deposit growth was higher than the credit growth.