Bank Credit Growth Remains In Single Digits In Latest Fortnight

Bank credit growth remained subdued in the latest fortnight despite the government’s efforts to ease access to credit through loan fairs.

Net bank credit in the fortnight ended Oct. 11 grew 8.84 percent, according to data released by the Reserve Bank of India. This is similar to the growth of 8.79 reported in the previous fortnight. Deposit growth stood at 9.7 percent in the latest fortnight—marginally above credit growth.

The government has been trying to push up bank credit as a way to ease the flow of funds to the economy, which has been hit by a crisis across non-bank lenders. Loan melas have been organised by across the country starting October to facilitate the flow of credit.

On Oct. 14, Finance Secretary Rajiv Kumar said that state-owned banks have disbursed loans worth Rs 81,781 crore during Oct. 1-9 through loan melas. Out of Rs 81,781 crore, new term loans worth Rs 34,342 crore have been disbursed, Kumar told reporters after holding a review meeting of public sector banks.

The latest fortnightly data shows a Rs 21,644.9 crore or 0.22 percent jump over the previous fortnight. This compares to a 0.61 percent jump seen in the previous fortnight.

To be sure, loan sanctions take time to reflect in the data and only get captured when they are disbursed. Typically, disbursals in some categories take time. However, Kumar’s comments had suggested that funds have already been disbursed.

The weak flow of credit, which some consider a lag indicator, may lead to a further slowdown in the economy which is being held back by a large squeeze in credit availability emanating from non-bank lenders, cautioned Fitch Ratings in a report on Thursday. Bank lending, which comparatively held up in the first half of 2019, could not prevent a sizeable credit crunch.