The growth picked up in the fortnight ended January 13, 2023, with 16.5 per cent YoY growth to Rs 132.81 trillion, according to the latest data released by Reserve Bank of India RBI.
Credit growth contracted 0.2 per cent in the first fortnight of the calendar year.
Credit growth decreased to 14.9 per cent YoY in the fortnight ended December 30 due to base effect, as it increased by 9.2 per cent during the same period last year.
Credit growth had moderated last fortnight because of the base effect on the economy. Credit growth is picking up on a YoY basis and this has evened out. Prakash Agarwal, director-general, Financial Institutions, India Ratings Research said that the growth trend will continue because Q 4 is generally a strong quarter.
All of the reported Q 3 earnings showed healthy growth in their advances, led by growth in their retail credit portfolio. In early October, the overall credit growth has decreased from around 18 per cent.
A combination of factors, including the RBI's rate hikes, the slowing of GDP growth and the normalisation of the base effect, is needed to blunt the sharp growth in credit, according to experts.
Loan growth is likely to be negatively impacted by lower growth in working capital requirements, inflationary pressures, high interest rates and slower deposit growth going forward. There is a chance that corporate credit growth will be impacted by the fact that exports have fallen. Retail credit growth may see an impact due to rising interest rates. Agarwal said that next year the credit growth should be lower because of the combination of macro factors and base effect.
Deposit growth grew at a steady pace as deposits accretion in the system grew at 10.6 per cent YoY to Rs 176.74 trillion in the fortnight ended January 13. Deposit accretion grew at 9.2 per cent YoY, up from 9.2 per cent for the previous fortnight ended December 30.
As is the case with credit growth, deposit accretion saw a decline of 0.3 per cent in the first fortnight of the calendar year.
Deposit growth is picking up slowly as the RBI s rate hikes continue to pass. With system liquidity shrinking, have become more aggressive in order to raise deposits to fund the high credit growth in the economy.
The gap between credit and deposit growth has shrunk to 590 basis points from over 800 basis points earlier, but it still remains high.