Banks use liquid assets to fund credit growth as deposit growth lags; face NIM hit
Credit growth has continued to be around 16% YTDFY24 while deposit growth is 13%; Liquidity Coverage Ratio trends down, but remains comfortable.
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Credit growth has continued to be around 16% YTDFY24 while deposit growth is 13%; Liquidity Coverage Ratio trends down, but remains comfortable.
The growth rate of advances to NBFCs has fallen below the overall bank credit growth, which was last seen in March 2022.
CD ratio saw an uptick of 7 bps, compared to the previous fortnight, and stood at 80.0% in the fortnight ended January 26.
Excluding the HDFC merger impact, the personal loans growth rate of banks reduced by around 270 bps to 17.7% in December 2023 on a y-o-y- basis.
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The quarterly securitisation market volume has remained in the range of Rs 42,000-Rs 45,000 crore across the three quarters in FY24 and a significant expansion in credit is expected going forward.
Credit growth in the personal loans space continues to also be driven by miniaturisation of credit, increased use of credit bureaus for faster decisions and an increase in ecommerce transactions.
Last month RBI asked banks and finance companies to exit all investment in Alternate Investment Funds that have invested in companies that are debtors to the investing lenders. This directive came close on the heels of RBI’s move to curb bank loans to NBFCs.
The gross NPA ratio of banks could improve to 2.90-3.05 per cent by FY24 end. NNPA ratio is at a record low at 0.8 per cent as of September 30, 2023, and is likely to trend even lower in the next few quarters as PSBs continue to report improved asset quality figures.
In Q2FY24, there was a quarter-over-quarter moderation in NIMs, but they remained higher on a year-over-year basis.
Banks have sufficient cushion to absorb this impact along with the impact of ECL computation and should not need to raise additional capital.