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Bank deposits growth rate surged to its maximum in more than a decade

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bank-deposits-growth-rate-surged-to-its-maximum-in-more-than-a-decadeFlow from the 7th Pay Commission payments and doubled credit ­to ­deposit ratio, causes bank deposits growth rate to be at its maximum in more than a decade, though it still is a fraction of what it used to be on peak.

According to latest RBI statistics, in the fortnight ended September 2, bank deposits rose by 1.3% to Rs 1.3 lakh crore as the revised salary was credited to employees’ accounts. This is the highest normal time fortnightly growth in deposits which almost one fifth of the total amount (Rs 5.3 lakh crore), raised by banks in current fiscal so far.

Generally, deposit growth of over Rs 1 lakh crore is witnessed only at the end of a quarter in a financial year.

“The growth is likely because of the first payout, comprising of arrears of FY16 and FY17 of the 7th Pay Commission salary and pension increase,” said Saugata Bhattacharya, chief economist of Axis Bank. “This additional growth bank deposits will continue through FY17.”

In the fortnight ended on September 2,  even credit rose to 0.7% or Rs 48,600 crore which is over half of Rs 75,000 crore lent by entire banking sector. The same is with the Incremental credit deposit ratio which rose from 6.5% of the previous fortnight to 14% on September 2.

“Increase in retail credit offtake may continue for few months particularly during the festival season due to the 7th Pay Commission award to government employees. Preliminary signs of which are now visible in credit offtake,” added Bhattacharya.

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