SBI Report Calls Deposit Concerns A 'Statistical Myth'

As Finance Minister Nirmala Sitharaman holds a review meeting with heads of Public Sector Banks and Regional Rural Banks on Monday, the State Bank of India (SBI) in its latest report noted that the belief that the deposit growth in the banking sector is flagging is just a statistical myth.

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However, the report highlighted that, while it’s true that credit growth has outpaced deposit growth in recent years, leading some to trumpet this as a sign of decelerating deposit activity, a deeper analysis reveals a different story.

The report highlighted that in FY23, the banking sector, particularly All Scheduled Commercial Banks (ASCBs), registered the highest absolute growth in both deposits and credit since 1951-52.

Deposits grew by an impressive Rs 15.7 lakh crore, while credit expanded by Rs 17.8 lakh crore, pushing the incremental Credit-Deposit (CD) Ratio to a staggering 113 per cent. The momentum continued into FY24, with deposits rising by Rs 24.3 lakh crore and credit by Rs 27.5 lakh crore.

Despite the narrative suggesting a slowdown in deposit growth, the data tells us otherwise. Since FY22, incremental deposit growth has actually outpaced incremental credit growth, with deposits increasing by Rs 61 trillion compared to Rs 59 trillion in credit.