SBI Report Predicts Deposit Growth to Surpass Credit Growth in India

SBI Report Predicts Deposit Growth to Surpass Credit Growth in India

SBI Report Predicts Deposit Growth to Surpass Credit Growth in India

In a recent report, the State Bank of India (SBI) research team anticipates that deposit growth will soon exceed credit growth. The report highlights that the gap between credit and deposit growth has narrowed to 150 basis points, the lowest since May 2022. Previously, in April 2022, the gap was just 20 basis points when deposit growth surpassed credit growth.

According to the Reserve Bank of India’s (RBI) latest data, credit growth was at 13% year-on-year as of September 20, 2024, while deposit growth was at 11.5%. In comparison, last year, credit growth was 20% against a deposit growth of 13.2%.

On a Year-To-Date (YTD) basis, deposits grew by 5% to Rs10.3 lakh crore, whereas credit grew by 4.2% to Rs6.93 lakh crore. The report notes a decline in deposits by Rs44,755 crore during the fortnight, while credit increased by Rs78,769 crore.

The SBI report suggests that the slowdown in deposits has led to misconceptions about lower money supply growth. It explains that in an inflation-targeting framework, money supply is endogenous, and digitization has increased the money multiplier with less currency leakage.

The central bank uses interest rates to manage inflation and growth, rather than targeting monetary aggregates. The report concludes that credit influences deposits, and a decline in credit will likely lead to a decrease in deposits.

Doubts Revealed


SBI -: SBI stands for State Bank of India, which is the largest bank in India. It provides banking and financial services to people and businesses.

Deposit Growth -: Deposit growth refers to the increase in the amount of money that people and businesses keep in their bank accounts over time.

Credit Growth -: Credit growth is the increase in the amount of money that banks lend to people and businesses. It shows how much more people are borrowing from banks.

Basis Points -: A basis point is a unit of measurement used in finance to describe the percentage change in interest rates or other financial percentages. One basis point is equal to 0.01%.

Inflation-targeting framework -: An inflation-targeting framework is a way for the central bank to control inflation by adjusting interest rates. The goal is to keep prices stable so that the economy can grow steadily.

Endogenous -: Endogenous means something that is caused by factors within a system. In this context, it means that the money supply is influenced by the economy itself, not just by outside factors.

Central Bank -: The central bank in India is the Reserve Bank of India (RBI). It manages the country’s money supply and interest rates to ensure economic stability.

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