MUMBAI: The year-on-year growth in bank credit growth accelerated to 15.32% in the fortnight ended August 12, 2022 the fastest in three years outpacing the 8.8% growth in bank deposits. The wide gap between advances and deposit growth may prompt banks to raise deposit rates.
Total loans as of August 12 stood at Rs 124.3 lakh crore with banks adding Rs 61,175 crore loans during the fortnight. At the end of the first quarter credit growth stood at 14.2% while it stood at 14.5% as of end July 2022.
The strong growth in credit is partly due to strong retail demand, the increase in commodity prices, and higher demand due to government investments and s inflation which has pushed up working capital requirements for companies.
The growth in bank credit is despite RBI increasing its key policy rates thrice by a total of 140 basis points since May. One of the reasons for the high growth is the low base in the first half of FY22 because of the pandemic. Year to date (Since April 2022), bank credit has grown 4.5% this year as against -0.6% last year.
Bank deposits stood at Rs 169.5 lakh crore as of August 12. During the current financial year, banks have added Rs 4.84 lakh crore of deposits as against the Rs 5.4 lakh crore of advances.
Despite the upward pressures on interest rates, yields on government bonds fell by 8 basis points on Friday. The 10-year government bond closed at 7.21% down from its previous close of 7.29%, after an article in the Financial Times said that JP Morgan was seeking investor views on the inclusion of India in its global bond indices. Inclusion in global indices could bring up to $30 billion of passive funds into government bonds.
Inclusion in bond indices will also provide support to the rupee. According to RBI released on Friday, the forex reserves dropped by $6.68bn during the fortnight ended August 19 to $564 billion. Among reserve components, foreign currency assets (FCA) fell by $5.8 billion to $501.2 billion, while RBI’s gold holdings declined $704 million to $39.9 billion.
Total loans as of August 12 stood at Rs 124.3 lakh crore with banks adding Rs 61,175 crore loans during the fortnight. At the end of the first quarter credit growth stood at 14.2% while it stood at 14.5% as of end July 2022.
The strong growth in credit is partly due to strong retail demand, the increase in commodity prices, and higher demand due to government investments and s inflation which has pushed up working capital requirements for companies.
The growth in bank credit is despite RBI increasing its key policy rates thrice by a total of 140 basis points since May. One of the reasons for the high growth is the low base in the first half of FY22 because of the pandemic. Year to date (Since April 2022), bank credit has grown 4.5% this year as against -0.6% last year.
Bank deposits stood at Rs 169.5 lakh crore as of August 12. During the current financial year, banks have added Rs 4.84 lakh crore of deposits as against the Rs 5.4 lakh crore of advances.
Despite the upward pressures on interest rates, yields on government bonds fell by 8 basis points on Friday. The 10-year government bond closed at 7.21% down from its previous close of 7.29%, after an article in the Financial Times said that JP Morgan was seeking investor views on the inclusion of India in its global bond indices. Inclusion in global indices could bring up to $30 billion of passive funds into government bonds.
Inclusion in bond indices will also provide support to the rupee. According to RBI released on Friday, the forex reserves dropped by $6.68bn during the fortnight ended August 19 to $564 billion. Among reserve components, foreign currency assets (FCA) fell by $5.8 billion to $501.2 billion, while RBI’s gold holdings declined $704 million to $39.9 billion.
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