Banking Frontiers

Credit-Deposit ratio beats 80% mark


The outlook for bank credit offtake continues to remain positive, supported by factors such as economic expansion and a continued push for retail credit, CareEdge Ratings said.

Credit offtake continued to grow, increasing by 20.5% yearon-year (y-o-y) to reach D162.1 lakh crore, for the fortnight ending February 23, 2024. This rise can continue to be attributed to the impact of HDFC’s merger with HDFC Bank along with the growth in personal loans. If the impact of the merger is excluded, credit grew at 16.5% y-o-y for the fortnight compared to last year’s growth of 15.5%.

Deposits too grew by 13.1% y-o-y for the fortnight (including the merger impact) and reached D202 lakh crore as on February 23, 2024, driven by growth in time deposits. Excluding the merger impact, growth stood at 12.5%. Sequential­ly it remained flat. Deposit growth is expected to improve compared to earlier periods as banks look to shore up their liability franchise and ensure that deposit growth does not constrain credit offtake.

The Credit-Deposit ratio has been generally hovering around 80% since September 2023. The CD ratio saw an uptick of 26 bps, compared to the previous fortnight, and stood at 80.2% for the fortnight (February 23, 2024), The HDFC merger mainly drives this growth. If the merger impact is excluded, the CD ratio for the current fortnight stood at 78.0% compared to 75.3% on February 24, 2023.

The Short-term Weighted Average Call Rate (WACR) stood at 6.61% as of March 1, 2024, compared to 6.47% on March 3, 2023, due to liquidity and pressure on short-term rates.

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