Banking - Growth Concerns Remain; Receding Corporate Pain Aids Asset Quality, Profitability: Dolat Capital
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Dolat Capital Report
Deposit growth continues to outpace credit growth by a wide margin, aiding system liquidity.
Deposit growth has remained ~4% higher than credit growth for almost a year now and this has pushed down the credit-deposit ratio by over 4.5% to its lowest in a decade (excluding of demonetisation period).
This excess liquidity is being parked with the Reserve Bank of India under the reverse-repo window earning just above 3% close to the savings deposit rate for banks.
It is this negative spread that was expected to spur credit growth. However, weak demand and risk aversion has limited growth thus far.
Benign liquidity environment has supported lower short-term interest rates, which remain close to historic lows.
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