Note ban boosts deposits, lowers bank loan growth: Report

New Delhi, Jan 23 (IANS) The recent demonetisation in India led to an immediate jump in current account and savings account (CASA) deposits, incremental lending saw a massive drop, while digital banking witnessed a major surge, a report said on Monday.

"Demonetization led to an immediate surge in CASA deposits and CASA ratio jumped 2-4 per cent QoQ (quarter-on-quarter) for banks," American investment banking firm Jefferies said in the report.

The CASA ratio indicates the ratio of deposits in current and saving accounts to total deposits in a bank. A higher CASA ratio signifies a lower cost of funds.

"Disbursal, sanctions and inquiries fell significantly in November, started to recover mid-December. However, on absolute level, incremental lending activities are still below pre-demonetisation months for most lenders," the report said.

It said the growth in bank loans during the third quarter ended December was "muted on lower disbursements and prepayments".

"Lower disbursements and higher prepayments were the two key reasons for the moderation in loan book growth."

Prime Minister Narendra Modi had on November 8 announced demonetisation of Rs 500 and Rs 1,000 currency notes, saying the move was aimed against black money, counterfeit currency and terror financing.

The unprecedented measure set off a massive cash crunch, while citizens were given till December 30 to deposit the old notes in the banks.

Jefferies also noted that the other offshoot of the demonetisation drive was a major surge in digital banking.

"Cash crunch led to significant increase in Debit/Credit card usage, along with major surge in mobile/internet banking and latest Unified Payment Interface apps," the report said.