Reserve Bank of India / This planning of RBI worked, good news came after one year

Reserve Bank of India: Despite a temporary decline in inflation during the year 2024, the Reserve Bank of India (RBI) did not make any change in the policy rates. With the repo rate remaining stable at 6.50 per cent, interest rates on fixed deposits (FDs) remained high. As a result, banks saw a significant increase in the share of FDs in total deposits. As of September 2024, the share of FDs in total bank deposits rose to 61.4 per cent from 59.8 per cent a year ago.

Effect of attractive interest rates

According to the latest RBI report, high interest rates have led to a large amount of money shifting to fixed deposits. The share of FDs with an interest rate of 7 per cent or more rose to 68.8 per cent by September 2024 from 54.7 per cent a year ago. This increase reflects the trend of banks offering attractive interest rates and prioritising savings in times of inflation.

Distribution of deposits across regional and social categories

The latest data shows that bank deposit growth was 11.7 per cent year-on-year in Q2 2024.

Contribution of metros: Metro branches contributed 66.5 per cent of total deposits, while branches in metros accounted for 54.7 per cent of total deposits.

Contribution of rural and semi-urban areas: All categories witnessed double-digit growth.

Participation of women depositors: Women accounted for nearly 40 per cent of individual deposits.

Growth in public and private sector banks

Deposit growth in public sector banks was 9 per cent in September 2024, while in private banks the growth was around 15 per cent. Senior citizen deposits also increased, rising to 20.1 per cent in September 2024.

Loan growth decelerated

While FDs and deposits grew, bank loan growth decelerated.

Bank credit growth declined to 12.6 per cent in September 2024 from 15.3 per cent in March 2024.

Metropolitan branches accounted for 60.6 per cent of the loan disbursement, but these branches recorded a growth of only 11.6 per cent.

Sector-wise performance of credit disbursement

Agriculture and industry: Agricultural credit grew by 13.2 per cent and industry credit grew by 10.4 per cent.

Housing and personal loans: Housing loans grew by 13.2 per cent and personal (non-housing) loans grew by 17.5 per cent.

Female borrower participation: The share of female borrowers in personal loans rose to 23.6 per cent.

RBI strategy conclusion

RBI's tight monetary policy not only helped in controlling inflation but also strengthened the deposit schemes of banks. Better interest rates attracted people to safer options like fixed deposits. This not only increased savings but also brought stability in the banking sector.