The Reserve Bank of India’s withdrawal call of Rs 2,000 notes and the near total return of the currency to the system has led to deposit accretion hitting a six-year high of Rs 191.6 lakh crore in June, according to a report.

Earlier this month, the RBI said more than three-fourths of the total 3.62 lakh crore of Rs 2,000 bank notes have come back to the system by way of deposits (over 85%) and the rest as note exchanges.

According to Sanjay Agarwal, a senior director with Care Ratings, deposits saw a healthy on-year growth of 13% to Rs 191.6 lakh crore, which is the highest since March 2017 in the fortnight ending 30 June, partly supported by the withdrawal of the Rs 2,000 currency notes and higher interest rates on deposits.

Deposits rose 13% in the reporting fortnight and sequentially, it expanded by 3.2% to Rs 191.6 lakh crore.

In absolute terms, deposits rose by Rs 22 lakh crore in the trailing 12-month period when it had stood at Rs 185.7 lakh crore, news agency PTI reported.

As a result, the spread between credit and deposits growth dropped to 326 basis points in the reporting fortnight as against 875 bps in November 2022, which was the largest. This can be attributed to a rise in deposits in the last two to three fortnights.

This has had the short-term weighted average call rate (WACR) rising to 5.94% as of 30 June, from 4.3% as of 31 July 2022, primarily due to the elevated policy rates. The WACR had peaked at 6.69% as of 4 May 2023.

Meanwhile, credit offtake continued to remain elevated at 16.2% on-year to reach Rs 143.9 lakh crore for the reporting fortnight ending 30 June. This is driven by personal loans, non-banking financial companies (NBFCs) and agriculture & allied activities. In the same period last year, credit pickup was 14.5%.

The outlook for credit demand continues to be positive due to rise in capital expenditure on the back of the production linked incentive scheme, and retail credit push. However, it is still expected to moderate from 15% in FY23 to 13-13.5% in FY24.

The credit/deposit ratio has been generally trending upward since the later part of FY22 and generally hovering above 75% since December 2022. For the reporting fortnight, it stood at 75.1% expanding by 210 bps on-year from 1 July 2022, due to faster growth in credit compared to deposits.

However, on a sequential basis, it dropped by 40 bps from 16 June 2023. On the other hand, the incremental C/D ratio declined to 63.7% as of 30 June 2023, compared to 99.2% as of 1 July 2022.

The share of bank credit to total assets rose by 54 bps to 67.3% in the fortnight to 30 June 2023 due to higher credit growth. It also expanded by 20 bps from the immediate fortnight. Investment to total assets fell by 21 bps to 26.7% in the fortnight due to slower growth in investments. Meanwhile, it also declined by 46 bps from the immediate fortnight.