Bank credit growth is decreasing, with new bank deposits surpassing advances in the current fiscal year. Bank deposits remained at Rs 211.9 lakh crore as of July 26, 2024, according to RBI's monthly report. Since March 2024, banks have added deposits totaling Rs 7.2 lakh crore, 3.5% more than the previous year.

Bank credit was Rs 168.1 lakh crore at the end of July 2024, up Rs 3.8 lakh crore from March. The additional loans are 2.3% more than what banks issued the previous year.

"Credit offtake continues to reduce and is converging with deposit growth, emphasizing the system-wide problem of bolstering deposits. Personal loans and MSMEs continue to drive this rise. Meanwhile, credit growth has remained flat. This delay might be ascribed to RBI policies such as greater risk weights on unsecured loans and a bigger base impact," according to CareEdge Ratings analysts in their study.

"Deposits would remain dominant in FY25 as banks increased attempts to improve their liability franchise. Banks are also raising capital through certificates of deposit (at a greater cost), which have gained substantial appeal. "This focus aims to prevent constraints on credit uptake due to deposit growth," the report said.

Credit increased by 13.6% year on year, which was slower than the previous year's rise of 19.7%, while deposits increased by 10.6%. Deposit growth, albeit improving, has continued to underperform credit growth over the last year.

The slowdown in lending has resulted in banks' credit-deposit ratios being below 80% for the second fortnight in a row. The merger of HDFC with HDFC Bank has increased the total credit-to-deposit ratio in the banking industry. Excluding HDFC loans, the credit-to-deposit ratio would be at 77%.