Bank Credit and Deposit Growth Slow in Q4 of 2024, RBI Data Shows

According to the Reserve Bank of India (RBI), growth in bank credit and deposits slowed down in the October-December quarter of 2024. Bank credit growth dropped to 11.8% in December, compared to 12.6% in September. Likewise, deposit growth eased from 11.7% in the previous quarter to 11% in the final quarter of 2024.

Personal Loans and Sectoral Lending Show Slower Growth

Personal loans, which make up a significant portion of total credit, saw a slowdown. The growth of personal loans moderated to 13.7% year-on-year in December, down from 15.2% in September. Lending to sectors like agriculture and industry also decelerated during this period. In contrast, lending to sectors such as trade, finance, and professional services picked up pace, showing some strength in specific areas.

Public Sector Lending Sees a Significant Boost

One notable shift in the credit market was the surge in lending to public sector organizations. Credit to this segment rose sharply to 5.4% in December 2024, up from a modest 0.3% in the previous quarter. Public sector loans now make up 13.6% of total credit, highlighting a significant change in lending patterns.

Interest Rates: More Loans at Moderate Rates

On the interest rate front, the RBI data revealed that over half of all loans in December 2024 were issued at interest rates between 8% and 10%. Around 16% of loans carried rates below 8%, while the remaining loans had rates above 10%. This indicates that moderate interest rates remain common in the lending market, making loans accessible to a broad range of borrowers.

Term Deposits Outpace Savings Deposits

In the deposits segment, term deposits performed strongly, recording a 14.3% year-on-year growth in December 2024. This outpaced the more modest 5.1% growth in savings deposits. The increase in term deposits led to a higher share in total deposits, which rose to 62.1%, compared to 60.3% a year earlier.

Shift Toward Higher-Yielding Term Deposits

Interest rates on term deposits were a key driver behind this shift. The proportion of term deposits earning 7% or more rose to 70.8% in December 2024, up from 61.4% a year earlier. This suggests that depositors are increasingly attracted to higher-yielding term deposits, likely in response to more competitive interest rates.

Maturity Patterns in Term Deposits

RBI data further showed that a significant portion of term deposits had maturities of one to three years. Nearly 79.8% of incremental term deposits mobilized during the first three quarters of 2024 fell into this category. Another 11% had longer tenures. These trends suggest that many depositors are locking in their funds for medium to long-term periods.

Large-Value Deposits Dominate the Scene

Large-value deposits continued to dominate, with 56.1% of total term deposits in the April-December 2024 period valued at Rs 1 crore or more. This reflects a preference for higher-value deposits, which likely benefit from more favorable interest rates.

Senior Citizens Hold a Significant Share of Deposits

Senior citizens continue to make up a substantial portion of the deposit market. As of December 2024, they accounted for 20.2% of total deposits. This is a reflection of the stable and secure nature of bank deposits for retirees looking to preserve their wealth.

Looking Ahead: What Does This Mean for the Economy?

The slowdown in bank credit and deposit growth may signal a shift in the economy, as businesses and consumers adjust to changing financial conditions. While certain sectors continue to show strength, overall growth in the banking sector has slowed. This could have broader implications for future economic performance, depending on how trends evolve in the coming months.

What do you think? How do these trends affect your financial planning? Share your thoughts with us!