Banking spreads witnessed a highest MoM jump of 25bps in
Analysts at InvestCap attributed this fall in deposit cost to a favorable deposit mix by banking industry. They pointed that during most part of FY14 asset yield remained stagnant on account of heavy investment in government’s securities.
On category basis, spreads of public, private, foreign and specialized banks improved by 29/24/25/29bps MoM respectively.
Similarly, spreads on gross disbursement and fresh deposits also improved by 55bps to 5.43% as compared to 4.89% in May’14. Spreads of specialized banks drew down by 214bps whereas spreads of public, private and foreign banks jumped by 173/62/20bps MoM respectively.
Analysts viewed although banking spreads remain stagnant YoY in Jun’14 at 6.36% but the average spreads in FY14 fell down by 37bps to 6.16% as compared to average spreads of 6.53% in FY13. The average asset yield during FY14 was 11.13% whereas the same was 11.99% in FY13; a drop of 86bpsYoY.
Similarly, the average deposit rate has decreased by 49bps to 4.97% v/s 5.46% in FY13. More than offsetting dip in asset yield as compared to deposit cost was mainly on account of banking sector preference to invest in risk free government’s securities.
They expect credit to private sector picked up in FY14 to
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