Synopsis
Banking system’s loan-to-deposit ratios hit an all-time high of 81% in December quarter, signaling a widening gap between credit growth and deposit mobilization. Major lenders like HDFC Bank saw their LDRs approach 100%, prompting concerns about potential deposit rate hikes or limited scope for passing on RBI rate cuts.
Mumbai: Loan-to-deposit ratios (LDRs) across the banking system reached an all-time high of 81% in the December quarter, underscoring a persistent divergence between credit growth and deposit mobilisation.
At HDFC Bank, the country’s largest private-sector lender, loans grew 12% year-on-year last quarter, while deposits rose 11.5%, slowing from a 16% increase in the June quarter, according to proforma numbers. Consequently, the bank’s LDR edged back towards the 100% mark. HDFC Bank‘s gross advances stood at ₹28.44 lakh crore as of December-end, marginally below total deposits of ₹28.59 lakh crore.
“The recovery in loan growth and improvement in CASA growth are encouraging,” said Pranav Gundlapalle, head of India financials at Bernstein. “However, headline deposit growth remains weaker than expected, with any meaningful improvement in the LDR-towards management’s 90% target by FY27-now increasingly contingent on a seasonally strong pickup in deposit growth in the March quarter and sustained improvement through FY27.”
The broader banking system continues to witness significantly faster credit growth than deposit accretion. Proforma numbers released by Bank of Baroda showed global advances rising 14.57% year-on-year to ₹13.44 lakh crore as of December, while global deposits grew 10.25% to ₹15.47 lakh crore. Punjab National Bank reported an 8.5% rise in global deposits to ₹16.6 lakh crore, even as global advances expanded 11% to ₹12.32 lakh crore. Union Bank of India saw global deposits rise 3.4% to ₹12.22 lakh crore, lagging 7.13% loan growth, with advances at ₹10.16 lakh crore.
Among private lenders, Axis Bank reported a 14.1% on year rise in its gross advances to ₹11.70 lakh crore while deposits grew by 15% to ₹12.60 lakh crore. Kotak Mahindra Bank net advances grew 16% on year to ₹4.80 lakh crore while deposits grew 14.6% to ₹5.42 lakh crore.
Yes Bank reported a 5.2% year-on-year increase in advances to ₹2.57 lakh crore in the December quarter, while deposits grew slightly faster at 5.5% to ₹2.92 lakh crore. RBL Bank reported deposit growth of 12% to ₹1.19 lakh crore, broadly in line with a 13% increase in advances to ₹1.04 lakh crore, showed provisional numbers for the December quarter. IndusInd Bank saw its net advances drop by 13.1% on year to ₹3.18 lakh crore while deposits fell 3.8% to ₹3.94 lakh crore.
“At over 81% at a system level, LDRs are now at all-time highs,” said Suresh Ganapathy, India head-financials at Macquarie Capital. “If this situation persists, banks may be forced to raise deposit rates or may have limited room to pass on RBI rate cuts-both of which warrant caution.”
Non-banking lenders also continued to report strong balance sheet expansion. Bajaj Finance said new loan bookings grew 15% in the December quarter, while assets under management rose 22% year-on-year to around ₹4.85 lakh crore. Deposit book stood at about ₹71,000 crore as of December 31. Poonawalla Fincorp reported a sharp 77.5% year-on-year growth in AUM to ₹55,000 crore. M&M Finance said December-quarter disbursements rose 7% year-on-year to ₹17,600 crore, while business assets grew about 12% to nearly ₹1.29 lakh crore.
aniltikotekar4sme.com 