On a year-on-year basis, deposits rose 10.2% while advances climbed 10% in the fortnight ending July 25, showed the Reserve Bank of India’s (RBI) latest weekly statistical survey.
The modest credit expansion this fiscal was largely because of lower corporate credit demand as they have explored market-linked instruments like bonds and commercial papers for their fund requirement.
The flow of non-food bank credit during the financial year 2024-25 reduced by about ₹3.4 lakh crore to almost ₹18 lakh crore, while the flow from non-bank sources more than made up for this decrease, RBI Governor Sanjay Malhotra highlighted during his monetary policy statement.
Within the retail segment, housing loan demand has not seen traction as expected by many industry leaders.
“We did expect higher demand after a cumulative 100 basis points rate cut. But there is no surge in demand despite rate cuts. Many borrowers are perhaps waiting for the rate cut cycle to be completed to get the full benefit of it,” LIC Housing Finance managing director Tribhuwan Adhikari said last week.
RBI Governor Sanjay Malhotra, however, on Thursday said that housing loan growth at 14% was quite reasonable, given the fact that taking a housing loan is a long-term investment.
Even though the growth rate of bank credit slowed last year, the overall flow of financial resources to the commercial sector increased to ₹34.8 lakh crore in 2024-25 from ₹33.9 lakh crore in 2023-24.
Top bank executives exuded confidence of a higher credit growth going forward which will be supported by retail growth from the second quarter onwards with the onset of festive demand. However, banks are facing a challenge in raising deposits. Although, in the first five months deposit growth outpaced credit growth.
With deposit rates falling in sync with the central bank’s softer monetary policy, savers are looking for alternative investment options to maximise return. This has raised the challenge for banks in mobilising deposits.
Bankers said they are trying to offer value added services with liability products to retain customers.
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