The bank credit in India would grow at a average pace of about 13-14 per cent between 2018-19 and 2019-20, which is significantly faster compared with the 8 per cent recorded in FY2018, said a report by Crisil.
The bank credit in India would grow at a average pace of about 13-14 per cent between 2018-19 and 2019-20, which is significantly faster compared with the 8 per cent recorded in FY2018, said a report by Crisil, adding the growth in bank credit would force a change in the deposit mobilisation plans of banks over the medium term.
To meet this credit growth, banks will have to raise about Rs 25 lakh crore over the two fiscals, said the rating agency. "While Rs 5-6 lakh crore is expected to become available through the release of statutory liquidity ratio (SLR) funds, about Rs 20 lakh crore would need to be raised through fresh deposits," it said.
That would be well above the average annual deposit mobilisation of about Rs 7 lakh crore over the past few years, Crisil said and added it would put upward pressure on the interest rates bank offer on deposits.
"Traditionally, banks have utilised their excess SLR in the initial period of credit revival. They would do that this time around, too. That said, bulk of the credit demand would be met by deposit growth and to, a minor extent, by other resource raising options like infrastructure bonds."
Says Krishnan Sitaraman, Senior Director, CRISIL Ratings, “Lower deposit growth has meant a steady rise in the credit to deposit ratio (C/D Ratio) on a stock basis, which is expected to touch 78 per cent by the end of fiscal 2019, compared with 73 per cent at the end of fiscal 2017 (refer to Chart 1 in annexure). Banks will need to raise at least Rs 19-20 lakh crore of fresh deposits until March 2020 to keep the credit-deposit ratio near 80 per cent, which in itself would be highest in a decade.”
Private banks with strong balance sheets and robust credit growth are expected to lead the race for deposits and will account for about 55-60 per cent of the incremental deposit mobilisation, report said.
"These would be followed by public sector banksoutside the Reserve Bank of India’s Prompt Corrective Action framework with ~30-35 per cent."