Bank deposits grew 17.8% year-on-year in August, the fastest pace in a decade, though the headline figure owes more to a special dollar window than to domestic savers. The Reserve Bank of India data released Friday shows credit growth at 19.1%, down from 19.4% at the end of July, leaving the credit-deposit ratio at 80.32%.
The FCNR-B distortion
Overseas Indians parked $126 billion in foreign currency non-resident (B) deposits in the roughly two-and-a-half months since the RBI opened a dedicated window, Governor Sanjay Malhotra said in a CNBC-TV18 interview. Nearly half, 48.5%, is locked in for five years, another 42% for three years, and the remainder for four. The previous decadal high for deposit growth was 15.4%, recorded just a month earlier.
Credit growth steadies
Malhotra described credit expansion as secular across sectors. The 19.1% year-on-year pace suggests lending has not accelerated in step with the deposit surge, a point the headline ratio underscores. In the fortnight ended August 31, banks added a net Rs 9.4 lakh crore, pushing outstanding deposits to Rs 278.7 lakh crore.
The deposit mix shifts
Indian savers continue to redirect funds toward market-linked instruments in search of higher returns, a trend that predates the FCNR-B window. The special inflows have papered over what would otherwise be a sharper slowdown in local mobilisation, leaving the system more dependent on non-resident dollar flows than the aggregate number implies.