Credit Growth Outpaces Deposits in March Quarter

Speedy Summary

• Bank deposit growth in the March quarter lagged credit growth, as per provisional figures submitted too exchanges.
• South Indian Bank,Central bank of India,and punjab & Sind Bank reported year-on-year deposit growth of 5.5%-8.7%, while their credit grew faster at rates between 10%-16%.
• CASA (current account, savings account) ratios for these banks fell as low-cost deposits grew slower compared to fixed deposits-a trend consistent across the banking industry.
• Punjab National Bank reported domestic deposit and credit growth at approximately 13% on year.

!Deposit Growth Lags Credit’s in March Quarter

Indian Opinion Analysis
The slower deposit growth relative to credit expansion indicates a liquidity challenge for Indian banks, potentially driven by a shift toward fixed deposits amidst rising interest rate scenarios compelling savers away from traditionally low-cost CASA accounts. This could pressure banks’ profitability if lending demands continue outpacing deposits while cost-effective sources of funding decline.As major players such as Punjab National Bank maintain steady double-digit growth in both segments, focus may shift on strategies smaller banks adopt to manage this liquidity divide effectively over time.

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