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'Bank deposits growth trails credit growth'
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IANS | 15 Jan, 2023
The growth in deposits in Indian banks is in single digits and trails
the credit growth, states a report by BNP Paribas Securities.
In a research report, BNP Paribas said that the deposits are generally weak and CASA (current account, savings account) weaker.
"With
system deposit growth in high single digits y-y, materially trailing
credit growth, we expect most deposit growth within our coverage
universe to have come from term deposits rather than CASA," BNP Paribas
said.
According to the report, the banks with high-CASA took
material term deposit rate hikes in the previous quarter -- although
trailing less prominent names materially -- and should see greater
mobilisation of term deposits in 3QFY23.
"We expect a small
quarter-on-quarter (q-q) rise in margins for most banks as loan
repricing and asset mix shift more than offset the cost of fund
increases," the report said.
BNP Paribas expects the stellar
performance on credit costs to continue for the sector as asset quality
seems to be sustaining, as per management commentary of most banks.
As
to the credit trends, BNP Paribas said in the early part of FY23,
growth was led by strength in low-touch, urban, data-rich, white collar
retail product segments such as mortgages, personal loans, credit cards
and prime corporate loans.
By 2QFY23, a shift was visible as
higher-touch segments such as commercial vehicles, small medium
enterprises and rural started to report a growth pickup.
"We
expect this trend to have gathered more steam in 3QFY23 as banks'
confidence in these product segments increased due to encouraging
macroeconomic data despite reasonably tight monetary and liquidity
conditions," the report notes.
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