The Reserve Bank of India’s (RBI) latest data shows that banks are having to raise costlier deposits, which is putting pressure on their lending margins.

Term deposits, which offer more attractive return to customers, have outpaced the growth in CASA (current account and savings account). Their share in total deposits rose to 61.4% in the September quarter from 59.8% a year ago, as per RBI data. This is despite banks starting several initiatives to increase their low-cost CASA deposits, which are seeing a dip in the overall share in a high interest-rate era.

On top of that, the share of high-cost deposits over 7% interest are showing a rise. This has increased to 68.8% in the September quarter from 54.7% a year earlier.

"A substantial amount of deposits have shifted to higher interest rate bucket during the latest monetary policy tightening cycle; term deposits bearing over 7% interest rate has increased to 68.8% from 54.7% a year ago," RBI said.

The RBI on Tuesday released Quarterly ‘Basic Statistical Return’ (BSR): Deposits with Scheduled Commercial Banks - September 2024. 

The growth in bank deposits is seeing no radical shift. As per the BSR, bank deposits growth year-on-year at 11.7% in September 2024 remained close to that in the previous quarter. 

For public sector banks, deposits growth year-on-year inched up to 9% in September 2024 compared to 8.1% in the previous quarter. This, however, remained well below that for other bank groups at above 15%.

While public sector banks lagged behind their private sector counterparts in deposit growth in the September quarter, they were ahead when it came to lending. As per RBI data, public sector banks showed credit growth of 13% in the September quarter compared to a year-on-year growth of 11.9% posted by private banks. 

“Public sector banks and private sector banks which have 53.2% and 41.8% shares, respectively, in credit by non-RRB SCBs, recorded 13% and 11.9% increase (y-o-y), respectively, in September 2024,” RBI said.

The RBI’s BSR report takes into account scheduled commercial banks (SCBs) and excludes regional rural banks (RRBs).

As per RBI, deposits of all population groups (rural, semi-urban, urban, metropolitan) recorded double-digit annual growth. During the second quarter of the current fiscal, 66.5% of the total incremental deposits were contributed by the metropolitan branches, which have 54.7% share in total deposits. 

Of the total deposits, 51.4% was held by individuals; female depositors owned nearly 40% of the deposits by individuals, the RBI said.

The share of senior citizens’ deposits increased to 20.1% in September 2024 from 19.7% a year ago.

On the loan front, bank credit growth (y-o-y) moderated to 12.6% in September 2024 from 15.3%, net of merger, in March 2024.

Metropolitan branches of banks, which accounted for 60.6% of loans, recorded lower growth of 11.6%.

Agriculture, industry, housing and personal (non-housing) loans had 11.5%, 23.7%, 16.5% and 14.9% shares, respectively, in credit by non-RRB SCBs; they recorded 13.2%, 10.4%, 13.2% and 17.5% growth (y-o-y), respectively.

The loan data was released by the RBI is its quarterly BSR on 'Outstanding Credit of Scheduled Commercial Banks'.

"Credit to private corporate sector exceeded the headline credit growth and stood at 16.5% (y-o-y) in September 2024; working capital loans accelerated to 15.3% from 14.1% a year ago," RBI said.

The share of female borrowers’ loans to individuals has been rising gradually and it stood at 23.6% in September 2024.