Banks’ deposit growth rate rises over 2-month high in September, shows RBI data

Bank deposit

The rate at which banks' deposits grew was at a more than two-month high in September due to innovative schemes and efforts to raise liabilities through higher rates.

According to Reserve Bank of India (RBI) data, banks' deposit growth stood at 11.34 percent as on September 20, 2024, compared to 10.96 percent as on September 6.

Banks’ deposit growth rate stood at 12.55 percent as on June 28, 2024. After this, the growth rate ranged from 10.64 percent to 11.09 percent between July 12 and September 6, the data showed.

On the other hand, credit growth remained stable at around 13 percent over the period.

The provisional numbers put out by banks showed that deposit growth rate on a yearly basis was higher in the second quarter of the current financial year compared to the first.

For instance, Bank of Baroda reported a 9.11 percent rise in its global deposits in Q2FY25, compared to an 8.83 percent rise in Q1FY25. Similarly, domestic deposits rose 7.14 percent in Q2FY25, against 5.25 percent in Q1FY25.

Union Bank of India posted a 9.17 percent increase in total deposits in the July-September quarter, versus 8.52 percent in the April-June quarter.

While IDFC First Bank’s loans and advances grew from Rs 1,83,236 crore as on September 30 2023 to Rs 2,22,188 crore one year later, an annual growth of 21.3 percent, customer deposits over the same period grew from Rs 1,64,726 crore to Rs 2,17,738 crore, a growth of 32.2 percent.

The provisional business performance for HDFC Bank shows a deceleration of loan growth (7 percent on-year) and steady deposit growth (15 percent on-year).

In the second quarter of the current fiscal, analysts at JM Financial expect a 14.4 percent on-year growth in loans (14.7 percent for private banks and 13.9 percent for state-owned ones) and 11.2 percent on-year growth in deposits (15.3 percent for private and 9.0 percent for public).

“Cost of deposits continue to inch up albeit at a more gradual pace than seen previously and we also believe that the system is possibly reaching a peak in deposit rates, as system credit and deposit growth has converged meaningfully,” they said in a report.

Banks have been struggling with slower deposit growth compared to credit growth over the past few months. The increase in the gap between deposits and credit creates an asset-liability mismatch for lenders.

This rising gap has been a matter of concern for the government and the RBI, which has asked banks to focus more on deposit mobilisation through innovative products.

"We also need to recognise that with greater innovations in product offerings by banks newer risks which can impact deposit growth, the demand for higher coverage for deposits, risk-based premium would be better options for the deposit insurer to ensure robustness of its finances and also enhance its capability to operate in the changed financial milieu," RBI Deputy Governor M. Rajeshwar Rao said on August 19, speaking at the IADI Asia-Pacific Regional Committee International Conference 2024 hosted by Deposit Insurance and Credit Guarantee Corporation at Jaipur.