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Updated January 30th, 2024 at 17:51 IST

Positive 2024 outlook for bank credit offtake amid improved deposit growth

The optimistic outlook is attributed to factors such as economic expansion and a continued push for retail credit.

Business Desk
Indian Economy
Positive 2024 outlook for bank credit offtake amid improved deposit growth | Image:Freepik
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Bank credit offtake: CareEdge Ratings, in a recent report, painted a positive picture for the outlook of bank credit offtake in 2024, coupled with expectations of enhanced deposit growth. Ending on January 12, 2024, saw a credit offtake, surging by 20.3 per cent year-on-year to reach Rs 159.7 lakh crore, primarily influenced by the impact of the HDFC-HDFC Bank merger and substantial growth in personal loans.

Excluding the merger impact, the report reveals a credit growth rate of 16.1 per cent year-on-year for the fortnight, slightly trailing last year's 16.5 per cent growth. Concurrently, deposits experienced a year-on-year growth of 13.1 per cent for the same fortnight, inclusive of the merger impact, with expectations pointing towards an improvement in deposit growth throughout 2024.

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Factors affecting credit offtake

The optimistic outlook for credit offtake in 2024 is attributed to factors such as economic expansion and a continued push for retail credit, backed by the momentum of increasing digitalization, notes the report. However, a mild cooling-off might be observed in unsecured personal loans and NBFC advances. The current capital levels for banks and NBFCs are deemed comfortable, as per the report.

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While the report points towards a positive credit landscape, it also highlights potential challenges such as higher interest rates, inflation, and global uncertainties related to geopolitical issues, which could exert pressure on credit growth.

The credit-deposit (CD) ratio has been maintaining a trend below 80 per cent since September 2023, witnessing a noteworthy uptick of 44 basis points, reaching a three-year high at 79.9 per cent in the fortnight ending January 12, 2024.

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Although deposits have showcased a relatively steady performance since the COVID-19 pandemic, the report underscores that credit growth has significantly outpaced deposit growth in recent years, outlining the dynamics of the banking sector's evolving landscape.

(with PTI inputs)

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Published January 30th, 2024 at 17:51 IST

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