04 April 2013
Banking
INDIA BANKING: Loans and deposits growth converge after a
year; Business growth remains moderate at 14%
RBI released the banking sector business data for the last reporting fortnight of FY13
(ended 22
nd
March 2013). Key takeaways:
‐
Loan growth moderated to 14.1% v/s 15.4% YoY as fortnight earlier. In absolute
terms, loans increased by INR820b v/s INR548b a fortnight ago and INR1.23t a
year ago. Deposits growth improved to 14.3% v/s 13.1% YoY a fortnight earlier.
In absolute terms, deposits stood at INR912b v/s INR991b a fortnight ago and
INR229b a year ago.
‐
In last one year, this is the first instance of both deposit and loan growth rates
converging (hitherto the gap was almost 3%). The data pertains to the last
reporting fortnight; however, the RBI also reports numbers for the last week,
where year‐end aberrations take place.
‐
YTD (over March 2012), loans increased ~INR5.58t to INR52.6t whereas deposits
grew ~INR6.4t to INR67.5t. In percentage terms YTD loan and deposit growth
stood at 11.9% and 10.5%.
‐
On a fortnightly basis CD ratio improved 20bp to 78%. YTD (Mar‐13 over Mar‐
12), incremental CD ratio stood at 77.3% v/s 89.4% a fortnight ago
‐
SLR deposits declined to INR12b v/s INR416b a fortnight ago. As a result, SLR
declined by 36bp on a fortnightly basis to 27.16%.
Business growth continues to remain moderate; CD ratio at 78%; SLR at 27.2%
‐
Loan growth moderated to 14.1% v/s 15.4% YoY as fortnight earlier. However,
deposits growth for the banking system improved to 14.3% v/s 13.1%
YoY
a
fortnight earlier. In absolute terms, loans increased by INR820b v/s INR548b a
fortnight ago and INR1.23t a year ago.
-
Non‐food credit improved by INR896b v/s INR577b in the previous fortnight.
Non‐food credit growth declined to 14% v/s 15.3% a fortnight earlier. In
absolute terms, deposits stood at INR912b v/s INR991b a fortnight ago. As a
result, YTD deposits growth stands at 10.5% (INR6.4t in absolute terms).
-
On a fortnightly basis, CD ratio improved to 78% v/s 77.8% in previous fortnight.
TTM incremental CD ratio declined to 77.3% v/s 89.4% a fortnight earlier. YTD
CD ratio stood at 86.1%.
-
SLR investments declined to INR12b v/s INR416b in previous fortnight; SLR
declined 36bp on a fortnightly basis to 27.16%. YTD, banks continue to park its
excess liquidity in government securities as a result of which SLR remains higher
than 26.1% as of Mar‐12.
In Mar‐13 alone, loan and deposit in absolute terms increased by INR1.36t
(24.5% of the incremental loans in FY13) and INR1.9t (29.8% of the incremental
deposits in FY13).
1

Banking
Loan growth moderates on a fortnightly basis…
…while deposit growth improves
Business gr. Moderated sharply over the last one year (%)
YTD loans and deposits growth (INR b)
Excess liquidity being parked in G‐Sec (%)
CD ratio remains elevated (%)
Financial Sector View
‐
Our economist believes that the changed growth‐inflation outlook and stance is
a harbinger of more rate cuts to come (expected 50bp more in CY13) albeit in a
more calibrated fashion. In its mid‐term monetary policy, RBI cut policy rates by
25bp while keeping the SLR and CRR unchanged.
‐
Post the busy season, banks have started cutting deposits rates e.g. PNB cut
deposit rate by 125bp in 6‐12 months bucket and OBC has cut deposit rate by
25‐75bp across less than 1‐year buckets. We expect other banks to follow soon.
In the base rate regime, cut in deposit rate is imperative for a meaningful cut in
lending rates.
04 April 2013
2

Banking
‐
‐
Any improvement in business climate, economic growth and easing of interest
rate in the system, will help assuage asset quality concerns and would be viewed
favorably for financials (especially for state‐owned banks).
Our top picks:
state‐owned banks
‐
SBIN, PNB, CBK, UNBK
and
OBC;
private
sector banks ‐ ICICIBC, AXSB and YES; NBFCs – IDFC, POWF, and LICHF.
:
04 April 2013
3

Banking
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04 April 2013
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