We have published our monthly Banking Monitor. This is one of the four ‘data’ reports we publish. The report has over 60 charts covering trends in Bank credit, Bank Deposits, Profitability, NPAs, Capital adequacy at an Aggregate level as well as Sectoral and Bank group level. In addition, we also covers trends in Debt and Money Markets in the report.

The full report is for subscribers only, but a short excerpt is produced below.

Key Highlights

A lot of slack has got built up on Bank Balance Sheets in recent months as excess liquidity has got built. Money Markets remain flush with liquidity with ~Rs5tn of excess liquidity. This is over 2.5% of India's M3 or over 2% of GDP. Bank Deposits have grown faster than Credit in every single fortnight since September-2019. The banking system's Credit - Deposit ratio has fallen to just over 71%, the lowest since 2010 (excluding the Demonetisation period).

While the overall liquidity environment remains benign, at the margin liquidity has tightened due to the increase in the CRR. And this has flown through to the lower end of the yield curve where rates have increased 40-50bps since late last year. Similarly, other money market rates like the Tri-Party Repo or Market Repo have also increased in recent weeks and are now higher than the call rate (but still below the reverse repo rate). These rates had been lower than the call rate through 2020 and early 2021.

With money market rates having bottomed out, this is flowing through to lending and deposit rates of Banks as well, which after falling sharply in 2020 have barely changed in 2021 in aggregate. But with existing loans and deposits getting repriced rates on existing loans/deposits are still trending lower. This downward adjustment in rates on deposits and loans is broadly in sync and thus spreads have remained stable this year for the system. That said, for the private banks the downward adjustment in rates on loans has been a bit more than on deposits and thus their spread (difference between average interest rate on all loans and average interest rate on term deposits) has narrowed.

Private Banks seem to have doubled down on CASA growth. CASA deposits of Private Banks grew 10ppt higher than PSU Banks during the March quarter. Private Banks now have 45% of their deposits as CASA whereas PSU Banks have 43%. This difference of 2ppt is the highest in the last two and half years.

About our Reports

Banking Report is one of the four ‘Data’ reports we publish. Our data reports curate the most relevant indicators for a topic and present them in a neatly laid out visual format. We add short commentary to these reports to provide you with context and relevance for the data. The other reports that we publish cover Payments, Startups and the Economy. Except for the Startups report, the other reports are published monthly. Over the next few months, we will add reports on more topics.

You can download the samples for each of them from here.