Credit-deposit growth gap widens amid tight liquidity

Banking credit in the economy grew by 11.1 per cent year-on-year (Y-o-Y) in the fortnight ended March 7, while deposits grew at 10.2 per cent during the same period, leading to a gap of around 90 basis points (bps), according to the latest data from the Reserve Bank of India (RBI).

- SUBRATA PANDA

However, on an absolute basis, deposits increased by 2.25 trillion over the previous fortnight, while credit grew by 1.38 trillion. As of March 7, outstanding deposits stood at 181.28 trillion, while outstanding credit reached 225.10 trillion.

With liquidity remaining tight and deposit mobilisation under pressure, banks are refraining from aggressive lending. Many large private banks are focusing on reducing their credit-to-deposit (CD) ratio, leading to a slowdown in credit growth over the past few months.