Loan growth in India is in the highest three years and looks further in advance because economic activities get attractiveness but a much slower deposit growth can send banks that rush to funds and rapid increase rates, analysts and bankers.

The growth of deposits has failed because high inflation has produced less savings, as well as depositors chose to put money into shares and mutual funds to find better returns, said Madan Sabnavis, Chief of Economist at the Bank of Baroda State Owned Loan.

To increase deposit growth, the largest private lender in the country, HDFC Bank has begun short-term journey to increase deposits by offering higher interest rates on non-residencase accounts held by Indians who live abroad. Analysts believe that other lenders can also follow the same movement.

When the fund surplus in the system slowly is pulled out by the steps of the central bank, the bank margin and their profitability can be under pressure, forcing them to not only increase the deposit rates, but also may go to the more expensive capital market to collect funds needed needed needed by needed needed to meet credit requests.

The ICRA rating agency said in a record last week that they expect banks “to aggressively start pursuing deposits, which will also cause higher deposit rates.”

Bank India’s deposit growth, currently at 9.8%, has lived in one digit for most of the last 14 months, while credit growth – after touching the lowest record of 5.6% in FY21 – almost three times to 14.4% in two weeks to July 1.

Indian bank credit growth

Retail loan growth which includes private loans, mortgages, car loans continue to grow on faster clips and continue to surpass the company’s credit.

“Private loans have been a major growth of the Indian banking sector over the past few years, because company loans have been jammed due to NPA (non -performing assets) and Deleveraging,” said the ranking of maintenance in a report earlier this week.

In the future, while the prospect of credit growth appears promising, high inflation and interest rate increases can provide shadows, the treatment said.

Sectoral credit growth in India

Bank Credit Deposit Ratio – Currently 73% of the total bank deposit is lent – continues to increase, shows that their income capacity also improves.

But when credit demand increases, there may be pressure on funding unless the growth of deposits is suitable.

“In the next few months if the trend continues, we will not have any other choice but to increase deposit rates because market conditions are also not very profitable for us to go to the market to increase growth capital,” said a senior executive at a state -owned bank.

Indian Bank Credit Deposit Ratio