Credit-Deposit Ratio Sees Uptick, Credit Offtake Continues Growth

The credit-deposit ratio, which has been around 80% since September 2023, saw a slight increase of 26 bps (basis points) in the latest fortnight, reaching 80.2% by February 23, 2024. Excluding the impact of the HDFC merger, the ratio for this fortnight stood at 78.0%, showing a significant rise from 75.3% recorded on February 24, 2023.

Credit offtake, which represents the demand for loans, continued to grow, rising by 20.5% year-on-year (y-o-y) to reach Rs. 162.1 lakh crore for the same fortnight. This growth is attributed to HDFC’s merger with HDFC Bank and the increase in personal loans, as per CareEdge Ratings. Without the merger’s impact, credit grew at a healthy rate of 16.5% y-o-y compared to the previous year’s 15.5%. The outlook for credit demand remains positive.

Deposits also witnessed growth, increasing by 13.1% y-o-y to reach Rs. 202.0 lakh crore as of February 23, 2024, driven by growth in time deposits. Excluding the merger impact, growth stood at 12.5%, remaining flat sequentially. This growth in deposits is expected to continue as banks focus on strengthening their deposit base to support credit expansion.

The Short-term Weighted Average Call Rate (WACR) stood at 6.61% as of March 01, 2024, compared to 6.47% a year ago. This increase is attributed to liquidity pressure and its effect on short-term interest rates.

Overall, the increase in the credit-deposit ratio and the continued growth in credit offtake indicate positive trends in the banking sector, supported by strategic mergers and efforts to boost deposit growth.