Advances growth
Loan Growth
Advances growth is the year-on-year increase in the loans a bank has disbursed. Since banks earn interest on loans, faster loan growth means faster earnings growth.
Formula
Advances growth
Advances Growth (%) = (Advances This Year − Advances Last Year) ÷ Advances Last Year × 100
Benchmark: Read it with NPAs and capital adequacy; growth alone is not the achievement
Reading the number
Growth is not the hard part. Everyone in India wants a loan, and any bank could lend as much as it liked. Two constraints decide who grows well: lending only to people who will not become NPAs, and having the capital to lend in the first place.
That is why advances growth is read last, not first. A bank with a weak capital adequacy ratio simply cannot expand its loan book as fast as its peers, whatever the demand.
Indian example
Related ratios
Glossary terms
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