Kolkata: The gap between credit growth and deposit growth is likely to narrow in this financial year, reducing the liquidity risk that banks are facing at present, economists said.
Savers would be more prone follow safety-first principle and put their surplus funds in banks instead of investing in market related instruments as geopolitical concerns raise the volatility quotient, according to them.
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The US-Israel war against Iran led to a rout in equity indices, with the Sensex falling more than 10% in March to a two-year low below 72,000, making it the worst monthly performance in the past six years. Investors lost more than Rs 50 lakh crore in market capitalisation during the month.
“Deposits could do better due to fixed returns coming back in favour as markets remain volatile. Also, there is a high chance of a rate hike this year which will help deposit growth,” said Bank of Baroda chief economist Madan Sabnavis.
Economists at Crisil also expect an uptick in deposit growth this fiscal.
As of March 15, banks' deposit growth was seen at 10.8% while credit growth was recorded at 13.8%, widening the growth differential to 300 basis points. The gap was 70 basis points a year ago, as credit had expanded 11% while deposit had grown at 10.3%.
One basis point is equal to a hundredth of a percentage point.
The credit-deposit ratio also hit a record high of 83.04% at the end of March 15 as credit offtake continued to outpace deposit accretion.
Rating companies such as Crisil and CareEdge Ratings projected a moderation in credit growth as the economy is facing a downside risk following the West Asia crisis. In its annual outlook report, Crisil put the likely credit growth at 13% in 2026-27 on a base case basis, saying that downside risks to gross domestic product and hence credit growth, arising from geopolitical events, bear watching.
Crisil's chief rating officer Krishnan Sitaraman said deposit growth is a key monitorable and a wider growth differential would also slow credit delivery, besides the war impact.
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Export-oriented micro, small and medium enterprises, especially those having an exposure to West Asia, may face pressure in debt servicing, he said.
CareEdge Ratings projected the credit growth at 13-13.5% for this fiscal.
Total bank credit stood at Rs 207.7 lakh crore as of March 15, registering a 13.5% year-on-year growth. Bank credit expanded by Rs 18,672 crore on a net basis in the fortnight ended March 15, a sharp decline from the preceding fortnight's Rs 3.23 lakh crore expansion. Meanwhile, deposits contracted by 1.78 lakh crore to Rs 250.1 lakh crore due to tax-related liquidity outflows before the fiscal-end.
Savers would be more prone follow safety-first principle and put their surplus funds in banks instead of investing in market related instruments as geopolitical concerns raise the volatility quotient, according to them.
Also Read: Q4 impact: Bank stocks slump up to 32% in 3 months, but brokerages bet on SBI, HDFC Bank, 6 more stocks. Check why
The US-Israel war against Iran led to a rout in equity indices, with the Sensex falling more than 10% in March to a two-year low below 72,000, making it the worst monthly performance in the past six years. Investors lost more than Rs 50 lakh crore in market capitalisation during the month.
“Deposits could do better due to fixed returns coming back in favour as markets remain volatile. Also, there is a high chance of a rate hike this year which will help deposit growth,” said Bank of Baroda chief economist Madan Sabnavis.
Economists at Crisil also expect an uptick in deposit growth this fiscal.
As of March 15, banks' deposit growth was seen at 10.8% while credit growth was recorded at 13.8%, widening the growth differential to 300 basis points. The gap was 70 basis points a year ago, as credit had expanded 11% while deposit had grown at 10.3%.
One basis point is equal to a hundredth of a percentage point.
The credit-deposit ratio also hit a record high of 83.04% at the end of March 15 as credit offtake continued to outpace deposit accretion.
Rating companies such as Crisil and CareEdge Ratings projected a moderation in credit growth as the economy is facing a downside risk following the West Asia crisis. In its annual outlook report, Crisil put the likely credit growth at 13% in 2026-27 on a base case basis, saying that downside risks to gross domestic product and hence credit growth, arising from geopolitical events, bear watching.
Crisil's chief rating officer Krishnan Sitaraman said deposit growth is a key monitorable and a wider growth differential would also slow credit delivery, besides the war impact.
Also Read: These 8 banking stocks have an upside potential of more than 23% in 1 year, according to analysts
Export-oriented micro, small and medium enterprises, especially those having an exposure to West Asia, may face pressure in debt servicing, he said.
CareEdge Ratings projected the credit growth at 13-13.5% for this fiscal.
Total bank credit stood at Rs 207.7 lakh crore as of March 15, registering a 13.5% year-on-year growth. Bank credit expanded by Rs 18,672 crore on a net basis in the fortnight ended March 15, a sharp decline from the preceding fortnight's Rs 3.23 lakh crore expansion. Meanwhile, deposits contracted by 1.78 lakh crore to Rs 250.1 lakh crore due to tax-related liquidity outflows before the fiscal-end.
