Declining bank deposits raise concerns about NBFC's fund raising capacity: Report
CareEdge Ratings anticipated that the credit-deposit ratios may pose a concern to the Non-Banking Financial Companies (NBFCs).
«Bank's credit-deposit ratios raise concerns about NBFCs' ability to secure funds,» it said.
By definition, the credit-deposit ratio (CD ratio) is a tool that measures how much of a bank's deposits are lent out as loans.
The report by the rating agency added that enhanced regulatory supervision will lead to higher compliance costs. However, emphasising the need to have greater supervision, it noted its importance for the stability of the sector.
«There is a growing discussion on the need to monitor the end-use of funds by NBFC. Additionally, smaller NBFCs and smaller fintechs are facing challenges on the liability side, underscoring the need for strategic solutions to address these challenges,» CarEdge said in the report.
Recently, a report by the State Bank of India (SBI) highlighted the continuous upward trend in credit growth in Indian banks, which is outpacing the growth of deposits.
SBI report states «Latest fortnightly credit and deposit growth number shows credit growth continues to outpace deposit, though moderated from last year growth of 16.2 per cent (June'23 YoY).»
Specifically, for the fortnight ending July 12, 2024, the report noted that the credit growth for All Scheduled Commercial Banks stood at 14 per cent on a year-on-year basis, while deposit growth was reported at 11.3 per cent.
This trend persists even as Indian households have substantially increased their
