RBI Bulletin: Gap between credit-deposit growth narrowing

RBI governor Shaktikanta Das on August 8 asked banks to offer innovative products and services and effectively use their branch networks to attract household savings as deposits

The gap between credit and deposit growth is narrowing, the Reserve Bank of India’s (RBI) Bulletin for September 2024 showed.

“In the credit market, with deposit mobilisation becoming a challenge, banks continue to rely heavily on certificates of deposit to meet funding needs so that lagging deposit growth does not constrain credit. Banks are also offering higher interest rates on deposits, with more than two-thirds of term deposits earning 7 per cent and above. The gap between credit and deposit growth is, however, beginning to narrow,” the bulletin’s State of the Economy article showed.

The bulletin does not represent the views of the central bank.

In the past few months, banks have been lagging in garnering deposits leading to high credit-deposit ratio for some banks. This, the regulator had highlighted earlier, needs to be worked on by introducing innovative products.

RBI governor Shaktikanta Das on August 8 asked banks to offer innovative products and services and effectively use their branch networks to attract household savings as deposits, amid increasing appeal of alternative investment avenues to retail customers.

The bulletin also highlighted that non--banking financial companies (NBFCs) are increasingly turning to offshore bonds.

It also said that microfinance institutions are facing some asset quality issues, warranting slowing down the pace of loan growth.