The Indian banking sector logged volume growth and not in margins owing to high-cost deposits during the first quarter of FY24, said BNP Paribas Securities India. The banking industry is logging credit as well as high-cost deposit growth through the low-cost CASA (current account, savings account) deposit growth remains weak.
The sector logged year-on-year credit growth momentum at mid-teens through 1QFY24, which should translate into high-teens credit growth for most large banks, especially in sticky loan segments like retail and small and medium enterprises (SME). The growth in deposits was in the early double digits from high single digits, which puts at rest the supply-side concern about credit growth momentum.
"Given incremental fund mobilization via higher-cost term deposits and floating rate yield increases already in the rear-view mirror for the most part, we expect the broader margin expansion story to pause," BNP Paribas India said.