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Nirmal Bang Report
Key Points
The Scheduled Commercial Banks non-food credit growth (excluding Housing Development Finance Corporation Ltd.) remained stable at 15.0% YoY in August 2023 (14.8% YoY in July 2023). Including HDFC, non-food credit growth remained strong at 19.9% YoY. On an incremental basis, for year-to-date FY24, non-food credit expansion (net of repayments) was robust at Rs 12.5 trillion versus Rs 5.9 trillion for year-to-date FY23.
Credit growth in August 2023 was driven by strong growth in services segment (up by 20.7% YoY in August 2023 versus 17.4% in August 2022), retail (up by 18.3% YoY in Aug-23 versus 19.4% in Aug-22) and agriculture and allied activities (up by 16.6% YoY in August 2023 versus 13.4% in August 2022). Credit growth in Industrial segment (at 6.1% YoY in Aug-23 versus. 11.4% in Aug-22) remained under pressure in Aug-23.
As per monthly interest rate data for Aug-23 released by the Reserve Bank of India, incremental deposit rates have increased by 233 basis points, to 6.36% (up by 1 bp month-on-month) since May 2022. Since that time, repo rate has been increased by 250 bps, which indicates that deposit repricing has moved in line with the rate cycle. However, the Weighted Average Lending Rate on fresh rupee loans has increased by 196 bps to 9.47% (up by 3 bps month-on-month) during the same period. This indicates some support to yields in case banks with a good proportion of loans at Marginal Cost of Funds-based Lending Rate with a reset of one-year and fixed rate book at one-two year resets.
Incremental credit-to-deposit ratio (on YoY basis) continued to normalise and stood at ~87% on September 8, 2023 versus ~90% on July 28, 2023.
National Automated Clearing House bounce rate (for recurring payments such as equated monthly instalment, insurance premium etc.) stood at 29.5% in Aug-23 versus 29.4% in July 2023 and 29.3% in June 2023 in volume terms and continued to remain elevated compared to pre-Covid levels.
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