Banks have seen their best loan growth in the first half of the current financial year on an incremental basis. Incremental loans in this period amounted to Rs 7.4 lakh crore. This is more impressive when compared to the negative growth seen in loans offered over the last three fiscal years.

The majority of the loan growth has been driven by the retail segment followed by working capital in the corporate segment. Therefore, the capex-based demand is starting to come back but has yet to see real meaningful growth.

Some of the loan growth has also come back for the banks by making inroads into segments which are dominated by NBFCs (Non-Banking Financial Companies). In lieu of the bank loans taken, NBFCs have opted to securitize their portfolio with banks. This has helped some of the banks or the banking sector in incremental loan growth. Thus, deposit growth has been good in this period although the growth rate has come down on a year-on-year basis.

Deposits added in H1FY23 so far have been about Rs 5.67 lakh crore, up about 17.6 percent year-on-year. In fact, the amount of deposit attrition seen in H1 FY23 is the second-best in the past 13 years.

Also Read: Earnings preview: Banks see loan growth picking up with asset quality set to improve in Q2FY23

The credit deposit ratio of the sector was at 74.15 percent as of September 2022, the best since May 8, 2020, when it was a little more than 74 percent.

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(Edited by : Abhishek Jha)