Private sector banks, SFBs see strong growth in credit, deposits in Q4

Mumbai: Private sector lenders and small finance banks (SFBs) reported a strong growth in both deposits and advances in the fourth quarter of FY24, with a marginal decline in credit to deposit ratio, according to business updates by individual lenders.

A few banks that are offering higher interest rates on savings accounts saw an improvement in low-cost deposits. Typically, the last quarter of a fiscal year is the busiest for banks in terms of business growth.

HDFC Bank reported a sequential growth of 7.5% in deposits at the end of March, compared to a 1.9% rise at the end of December 2023, and 26.4% a year ago. The country’s largest private sector bank saw an incremental addition of ₹1.7 trillion deposits in the fourth quarter, taking the total amount of deposits raised in FY24 to ₹3.5 trillion. Of the ₹1.7 trillion deposits mobilized in Q4, 77% were retail deposits, the bank clarified. The total deposit book stood at ₹23.8 trillion at the end of March.

HDFC Bank’s loan growth was, however, muted at 1.6% on a quarter-on-quarter basis. While retail and commercial and rural banking loan growth was a strong 4% sequentially, wholesale advances, excluding non-individual loans of the erstwhile HDFC Ltd, declined 2%. This is in line with the strategy of reducing the share of relatively low-yielding corporate loans to improve margins.

Among other private sector banks, Federal Bank saw a 5% sequential growth in deposits and advances each in January-March. RBL Bank saw a 12% sequential growth in deposits and 5% rise in credit book.

Among small finance banks, Suryoday SFB saw strong business growth, with deposits expanding 20% and advances by 14% quarter on quarter. AU SFB saw a 9% incremental growth in both loans and deposits. Equitas SFB saw 12% sequential growth in deposits and 5% growth in loan book.

Credit to deposit ratio (CD) saw a marginal fall in Q4, but continued to remain above 80% for most banks. CD ratio reflects the proportion of funds raised by banks through deposits, that have been utilized for lending. A high CD ratio signals liquidity and credit risks for banks.

“Based on the preliminary result updates, it appears that the credit to deposit ratio for these banks has declined in Q4 on a sequential basis. This has been supported by good deposit growth reported by these banks. Despite this we believe that deposit mobilisation and high credit to deposit ratio will continue to remain a challenge for funding cost and credit growth in this year,” said Anil Gupta, vice president, ICRA Ratings.

A majority of these lenders fared better than the industry. Reserve Bank of India (RBI) data on bank loans and deposits available up to 10 March showed that while non-food credit grew 20.4% from a year ago, deposits increased 13.7%.

Low-cost deposits consisting of current and savings accounts (CASA) showed a mixed trend in the fourth quarter. HDFC Bank saw an improvement in CASA to 38.2% at the end of March quarter from 37.7% at the end of December quarter. It is, however, lower than the 44% CASA reported at the end of March 2023.

Banks like RBL Bank, Suryoday SFB, Bandhan Bank, Yes Bank which offer 7% interest on their savings account products, showed an improvement in CASA in the fourth quarter. RBL Bank’s CASA improved to 35.2% at the end of March, from 33.8% in the previous quarter. Suryoday Bank’s CASA improved to 20.1% at the end of March quarter from 33.8% at the end of December quarter. Bandhan Bank’s CASA improved to 37% at the end of March quarter from 36% in the previous quarter.