Morgan Stanley:: Financial Services -Credit Growth Update – Both Deposits and Credit Picked Up This Fortnight

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February 24, 2011
India Financial Services 
Credit Growth Update – Both Deposits and Credit Picked Up This Fortnight 

Both credit and deposit growth accelerated in YoY
terms: Credit and deposit growth accelerated to 23.9%
YoY and 16.9% YoY, respectively, as of 11 February
2011, from 23.2% and 15.9% as of 28 January 2011.
Deposits and loans grew largely in tandem this
fortnight: Deposits grew by US$ 13.1 bn (+1.2%) over
the previous fortnight; there was a US$ 11.0 bn (+1.3%)
increase in advances.

LD ratio showed a slight uptick: The LD ratio rose to
75.1% from 75.0% as of 28 January 2011; it stood at
75.8% as of mid-December.  System interbank liquidity
remains in deficit: Rs820 bn as of 11 February 2011
versus Rs767 bn as of 28 January 2011 and Rs1003 bn
as of mid-December.
Implications: Since mid-December (when SBI raised
rates aggressively), deposits have grown by US$54 bn
(+5%) and loans by US$32 bn (+4%) – implying an
incremental CD ratio of 59%. Deposit growth momentum,
which had picked up in the previous few weeks, seems
to have been sustained. However, credit growth was
also reasonable this fortnight. We will continue to watch
this trend in deposit creation versus credit off-take more
closely in the coming weeks – especially in light of the
deposit rate hike recently effected by SBI (14 February
2011).