Too much credit.

"The Reserve Bank of India (RBI) discussed with banks the decade-high credit growth in wake of slower deposit mobilisation, in meetings with managing directors and chief executive officers (MD & CEOs) of public and private sector banks." BS. "According to the latest RBI data, bank credit has grown 17.9 percent year-on-year (YoY), a 10-year high, for the fortnight ended October 21. During the same period, deposit growth has grown 9.5 (percent) YoY, resulting in a credit deposit gap of 840 basis points." But, "The share of current and savings accounts (Casa) deposits of commercial banks has increased to 44.8 percent as of March 22-end from 41.7 percent three years ago." BS. "Casa are low-cost deposits of banks, which are margin accretive," and "accounted for 60.9 percent and 55.6 percent of incremental deposits during 2020-21 and 2021-22, respectively." These are very healthy numbers, so why is the RBI concerned? Is it because "Banks' personal loan outstanding stood at Rs 35.2 trillion as of June 17, higher by 18% YoY." FE. "The personal loans constitute close to 30% of the total non-food credit outsanding as of June 17." "In comparison, banks' loans outstanding to the services sector marginally moderated to 12.8% in June," and "As on June 17, total outstanding to the services sector stood at Rs 30.7 trillion." "The increase in household borrowing can be seen in the increase in credit card outstanding from a little under Rs 1.3 lakh crore (Rs 1.3 trillion) in end July 2021 to over Rs 1.6 lakh crore (Rs 1.6 trillion)." TOI. "In the personal loan segment, since end-March 2022, consumer loans and advances against fixed deposits have shown the fastest growth of 16.5% and 11.8%, respectively." Loans against fixed deposits are instantly available, and easy to repay since the money is already with the bank. The State Bank of India (SBI) will sanction a loan against fixed deposit online up to a maximum of 95% of the total invested in the deposit and charge just 1% interest over what it is paying on the deposit. But, surely the RBI is trying to be cute? The RBI held its interest rate at 4%, substantially below the rate of inflation, for 24 months, from May 2020 to May 2022, NDTV, which meant savers were losing money. It would, therefore, make great sense to borrow at low rates against fixed deposits and invest in government small savings schemes at higher rates. "In 2021-22, the interest rate on PPF (public provident fund) was 7.1% as against the 5.03% and investor got from fixed deposits," wrote Vivek Kaul. "In 2020-21, 17.3% of financial savings financial savings were invested in pension and provident funds (including PPF). This jumped to 22.7% in 2021-22." Or, the RBI may be worried because, "Reflecting the improvement in credit offtake, excess holdings of Statutory Liquidity Ratio (SLR) securities of Scheduled Commercial Banks (SCBs) moderated to 8.8 percent of their net demand and time liabilities (NDTL) as on August 26, 2022 from 10.4 percent at end-March 2022." Hindu. "Banks are required to invest 18 percent of their deposits in SLR securities, comprising central and state government securities," which means the government gets to borrow at cheaper rates. Banks also park excess funds in SLR which brings down yields. Any reduction in that may increase the amount the government needs to borrow at higher costs. The RBI looks to the interests of the government. 1.4 billion Indians try to circumvent its devious policies. Fear of loss is much greater than the joy of gain. Investopedia.