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Bank Loan vs Deposit: Big blow to loan takers, will not get loan easily this year, know the reason..

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The year 2024 may create new challenges for the Indian banking system. Global rating agency S&P has said that banks are facing a shortage of funds, due to which the process of distributing loans may also slow down this year. The rating agency has said that banks are not receiving deposits at the same speed at which they are distributing loans. This year may be sluggish due to a lack of sufficient funds to distribute loans.

The rating agency said, the credit growth, profitability, and asset quality of Indian banks will remain strong in the current financial year, which reflects strong economic growth. However, they may be forced to slow down their loan growth, as deposits are not growing at the same pace. Nikita Anand, director, SSEA, S&P Global Ratings, in Asia-Pacific's second-quarter banking update said the agency expects the region to recover if deposit growth, especially retail deposits, remains slow in the current fiscal year. Strong credit growth will decline from 16 percent to 14 percent.

More loans and less deposits-

Anand said the loan-to-deposit ratio has declined in every bank. Loan growth is two-three percent higher than deposit growth. Nikita Anand said in a recent seminar of S&P Global Ratings, 'We expect banks to reduce their credit growth in the current financial year and bring it in line with deposit growth. If banks do not do this, they will have to pay more to receive bulk funds, which will impact profits.

Private banks distributed more loans-

Generally, credit growth has been highest in private-sector banks. An increase of about 17-18 percent has been seen in these. On the other hand, public sector banks (PSBs) have seen credit growth in the range of 12-14 percent. This means that private banks have distributed more loans and due to fewer deposits like FD, the amount of loans they can distribute may reduce.

Interest in FD may increase-

Banking experts say that people are investing in other options with higher interest rates, due to which traditional options like banks have declined. To attract customers, banks will have to pay more interest on FD, only then their deposits will increase and they will be able to disburse loans. However, if banks do this, their net profits are also bound to be affected.

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