SBI report dismisses ‘deposit growth concerns’ calls it a statistical myth

“In FY23, all scheduled commercial banks had registered the highest amount of growth in deposits and credit since 1951-52. Deposits grew by Rs 15.7 lakh crore and credit by Rs 17.8 lakh crore, which has pushed the incremental credit to deposit Ratio (CD) to 113 per cent. The same story continued in FY24, and deposits grew by Rs 24.3 lakh crore and credit by Rs 27.5 lakh crore. The incremental CD ratio again surpassed 100 per cent and stood at 113 per cent.”

Despite the narrative of the slowdown in deposit growth, the data shows a different story. Incremental deposit growth has overtaken incremental credit growth, as deposits rose to Rs 61 lakh crore compared to Rs 59 lakh crore in credit since financial year 2022, the study said.

During FY14 to FY25 (till July 2024), the all schedule commercial banks deposits grew by Rs 144 lakh crore, while credit by Rs 116 lakh crore, exactly CD ratio of 79.9 per cent.

"The myth of a flagging deposit growth appears as just a statistical myth with credit growth outpacing deposit growth being tom-tommed as a deceleration in deposit growth," said the report.

RBI’s report highlighted that historically, there have been episodes where credit and deposit growth diverged for 2 to 4 years. Currently, we are in the 26th month of credit and deposit divergence, and this cycle could end between June and October 2025. “Beyond this period, deposit growth could inch up, and credit growth may decelerate significantly, signalling a rate reversal cycle. A slowdown in growth to some extent appears likely,” the report stated.