Steep decline in credit-deposit ratio

Loan support to Kerala’s social and economic sectors from the commercial banking system is beginning to drop, judging by the steep decline the banks’ credit-deposit (CD) ratio has undergone during the year gone by.

The CD ratio dropped by a staggering 775 basis points, from the level of 76.41 per cent to 68.66 per cent during 2013-14, according to data presented at the annual review meeting of the State Level Bankers’ Committee (SLBC) here last week.

While deposits grew by 22.04 per cent from Rs.2,29,148 crore to Rs.2,79,655 crore, advances increased only by 10.98 per cent, from Rs.1,75,087 to Rs.1,92,2010 crore in 2013-14. In real terms, the advances dropped in 2013-14 compared to the previous year.

While the advances grew by Rs.25,794 crore in 2012-13, they increased only by Rs.16,923 crore in 2013-14.

Non-resident deposits

The fall in CD ratio was not alone due to this drop in advances — which signifies sluggish absorption of credit by the economy.

Flow of deposits from non-residents (NR) has been very generous in 2013-14. NR deposits increased by a stunning 41.84 per cent during the year, from the level of Rs.66,190 crore to Rs.93,883 crore.

Domestic deposits

The growth in domestic deposits, on the other hand, has been only by 14 per cent during the year—from Rs.1,62,958 crore to Rs.1,85,722 crore.

This trend of NR deposits increasing their share in the total deposit basket had actually begun in 2011-12. It became more pronounced in 2012-13 and still more pronounced in 2013-14.

The NR deposits’ share went up from 23.33 per cent to 24.53 per cent in 2011-12, then to 28.89 per cent in 2012-13, and then to 33.58 per cent in 2013-14.

Thus, the NR deposits now account for more than a third of the total deposits in Kerala’s commercial banking system.

Kerala has been the hub of NR deposits in the country for all banks these past many years and the hub is turning busier than ever before.

More In: Kerala | National