What Goes Around Comes Around: Bank Credit Expands At 14.4 Per Cent, Deposits At 10 Per Cent In FY19

Deposits in the Indian banking system increased by 10 per cent y-o-y in the fortnight ending March 15 (2019), faster than the 9.8 per cent y-o-y growth during the fortnight ending on March 1 (2019), reports Indian Express.

However, bank credit bank expanded at 14.4 per cent year-on-year (y-o-y) in the fortnight ending March 15 (2019), albeit marginally slower than the 14.5 per cent y-o-y increase recorded in the previous fortnight.

Indicating a robust demand situation in the economy, bank credit is expected to grow at 13-14 per cent on average between FY19 and FY20, significantly faster than 8 per cent witnessed in FY18.

“Credit growth has shown a double digit improvement in the entire year. This is because of the consistent demand of the credit from the industry, and after the liquidity crisis in the NBFC sector, the credit demand in the scheduled commercial banks has further increased. The absolute growth in the credit has also been more than the absolute growth in deposits, which has also led to an increase in the CD ratio.” said Ashutosh Khajuria is the executive director and chief financial officer (CFO) of Federal Bank.

Greater Transparency In Rates

Also recently India’s largest lender State Bank of India (SBI) linked its interest rate on savings account with account balance above Rs 1 lakh and short-term loans to Reserve Bank of India's (RBI) repo rate, effective from 1 May 2019. This move is not only expected to bring greater transparency in how the bank decides its interest rates; it will also enable better transmission of RBI’s monetary policy.

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