During the year, RBI raised repo rate by 250 basis points to 6.5 per cent
Data released by Centre For Monitoring Indian Economy (CMIE) shows the demand for bank credit touched an all time high in financial year 2022-23. The analysis stated that credit offtake by commercial banks increased by a record-high Rs 17.8 lakh crore, a 15 per cent year-on-year growth.
However, while the demand for credit rises at a record pace, banks did not see a similar growth in deposits. Deposits grew by 9 per cent to Rs 15.8 trillion. This forced banks to explore other options for raising funds to meet the credit demand.
According to CMIE, certificate of deposits (CDs) and issuances of debt in the primary market emerged as the alternate source of funds for banks. Banks raised Rs 1.1 lakh crore from primary debt market in 2022-23 and Rs 1.2 lakh crore from CDs. It added that deposits continue to be the first option for banks as other sources remain expensive.
CMIE data suggests that despite an increase in weighted average domestic term deposits rates (WADTDR), the deposits in bank did not post a substantial increase. WADTDR on fresh deposits was 6.48 per cent in March 2023, an increase from 4.12 per cent in March 2022. In this period, RBI raised repo rate by 250 basis points to 6.5 per cent.
Going forward, CMIE expects the deposit rates to rise as banks look to meet the demand for credit as data for the first month of financial year 2023-24 suggests that credit demand will not cool down soon.