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Growth in Bank Credit & Deposits: RBI

  • 15 Mar 2021
  • 6 min read

Why in News

Recent data released by the Reserve Bank of India (RBI) showed that Bank credit and deposits grew and were higher in February 2021 than January 2021.

  • The credit and deposits for February 2021 were even higher than the pre-pandemic data of February 2020.

Key Points

  • Bank Related Data by RBI:
    • At the end of February 2021:
      • Bank credit grew by 6.63% to Rs.107.75 lakh crore which in February 2020 stood at Rs.101.05 lakh crore.
      • Bank deposits grew by 12.06% to Rs.149.34 lakh crore which in February 2020 stood at Rs.133.26 lakh crore.
  • Reason for Credit Growth:
    • The growth in bank credit is driven by an increase in retail loans.
      • Retail loans include a vast range of different loans. Personal loans such as car loans, mortgages, signature loans and credit cards all fall into the category of retail loans, but business loans can also fall into the category of retail loans.
    • The overall retail credit growth, which is currently at 9% is expected to accelerate further, led by mortgages (contributing 51%of retail loans) and back-end support by unsecured (cards/personal loans) and vehicle loans.
  • Bank Credit:
    • Banks and financial institutions make money from the funds they lend out to their clients.
      • These funds come from the money clients deposit in their accounts or invest in certain investment vehicles such as certificates of deposit (CDs).
        • A CD is a product offered by banks and credit unions that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time.
    • Bank credit consists of the total amount of combined funds that financial institutions advance to individuals or businesses. It is an agreement between banks and borrowers where banks make loans to borrowers.
  • Bank Credit In India:
    • The Bank credit in India refers to credit lending by various scheduled commercial banks (SCBs) to various sectors of the economy.
    • The bank credit is categorized into food credit and non-food credit.
      • The food credit indicates the lending made by banks to the Food Corporation of India (FCI) mainly for procuring foodgrains. It is a small share of the total bank credit.
      • The major portion of the bank credit is the non-food credit which comprises credit to various sectors of the economy (Agriculture, Industry, and Services) and also in the form of personal loans.
      • The data on bank credit is collected on a monthly basis by the RBI.
  • Bank Deposits:
    • Bank deposits consist of money placed into banking institutions for safekeeping. These deposits are made to deposit accounts such as savings accounts, current accounts, and money market accounts.
      • The account holder has the right to withdraw deposited funds, as set forth in the terms and conditions governing the account agreement.
  • Bank Deposits in India: In India there are four major types of Bank Deposits
    • Current Account:
      • A current account is a special type of account that has lower restrictions than a savings account when it comes to withdrawals and transactions.
      • It is also known as a demand deposit account and it is meant for businessmen to conduct their business transactions smoothly.
      • Banks also offer overdraft facilities on these, i.e., they let account-holders withdraw more money than there is in the account.
    • Savings Accounts:
      • It offers high liquidity and is very popular among the masses. It does, however, have cash withdrawal and transaction limits to promote digital payments.
      • Banks provide an interest rate which is only slightly higher than inflation, so it is not very optimal for investment.
    • Recurring Deposits:
      • It is a special type of term deposit where you do not need to deposit a lump sum savings rather a person has to deposit a fixed sum of money every month.
      • There are no premature withdrawals allowed in the account, but for a penalty, you can close the account before the maturity date of the deposit.
    • Fixed Deposits:
      • It is an investment avenue offered by banks, financial institutes and Non-Banking Financial Companies (NBFCs) that offers guaranteed returns.
      • It gives a higher interest than a regular savings account and offers a wide range of tenures ranging from 7 days to 10 years.


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