RBI reports widening credit-deposit growth gap amid rising loan demand

Kolkata: The gap between credit and deposit growth further widened with credit expansion beginning to show higher traction while deposit mobilisation by banks is tapering down.

Deposits growth print for the fortnight ending September 19 was noted at 9.5% year-on-year, 30 basis points lower than 9.8% recorded in the preceding fortnight. Credit growth, on the other hand, recorded at 10.4% against 10.3% for the same period, Reserve Bank of India's data showed.

This trend was observed before the new Goods and Services Tax (GST) regime. Bank credit is expected to be higher in the festive season especially after the implementation of lower GST rates from September 22 following which consumer demand has logged a sudden spurt.


Bankers remained optimistic about overall loan demand in the third quarter starting October 1, according to the bank lending survey conducted by RBI.

Higher loan demand is expected from agriculture, mining & quarrying, manufacturing, infrastructure, and services sectors, the survey indicated.

"Overall, easy terms and conditions for loans are expected to prevail during the quarter," it said.

Meanwhile, savers continue to explore investment opportunities other than bank savings and deposits with sharp fall in deposit rates. The weighted average domestic term deposit rate on fresh deposits declined by 106 basis points since February this year, more than the 100 bps reduction in the policy rate rate.

On the credit side, banks' weighted average lending rate moderated by 58 bps for fresh rupee loans while the outstanding rupee loans turned 55 bps cheaper.

Banks' credit expansion is expected to get a fillip with the regulatory push. The central bank has dished out a package of seven direct measures to boost credit flow by allowing new growth vistas. RBI has also announced 15 additional measures to make banks more resilient and competitive so that higher credit demand can be met.