Bank deposit and credit growth recover from demonetisation shock
Latest News »
- China’s new blockbuster ‘Wolf Warrior 2’ should worry Hollywood
- Kim Jong Un orders production of more rocket engines, warhead tips: KCNA
- Market Live: Sensex, Nifty jump in opening trade, DLF shares rise 3%
- Mutual funds mark down investments in Uber by up to 15%: report
- Uber to launch final phase of UPI-based payment facility today
Bank deposit growth as on 7 July was 10.74% from a year ago, slower than the 11.21% growth as on 11 November.
The demonetisation decision was announced on 8 November and it led to a huge influx of deposits into banks as people rushed to deposit their old five-hundred and thousand-rupee notes.
The fact that the year-on-year (y-o-y) rate of growth in bank deposits is now slower than what it was at the beginning of demonetisation indicates that bank deposit growth is now back to normal.
That is also true for growth in bank credit.
As the chart shows, growth in non-food credit as on 7 July was 6.87% year-on-year, faster than the rate of growth as on 25 November, although it’s still below non-food credit growth as on 11 November.
The normalization in credit and deposit growth, however, does not necessarily mean that banks are back to their pre-demonetisation days.
For one, it remains to be seen whether demonetisation has had long-term effects on the informal sector, some of which may impact banks.
Secondly, it still remains to be seen how much of the recovery in credit is on account of lending to businesses, rather than merely ramping up personal loans.
And, finally, the fresh disruption from the introduction of the goods and services tax, or GST, could affect banks.