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Bank Credit Grows 3.2% In First Nine Months Of Current Financial Year

Deposit growth outstrips lending for banking system in first nine months of current fiscal. 

A couple speaks to an HDFC Bank Ltd. loan officer about a home loan at a branch in eastern Mumbai, India. (Photographer: Santosh Verma/Bloomberg News)
A couple speaks to an HDFC Bank Ltd. loan officer about a home loan at a branch in eastern Mumbai, India. (Photographer: Santosh Verma/Bloomberg News)

Bank credit grew 3.2% to Rs 107.05 lakh crore in the first nine months of the current financial year, compared with a growth of 2.7% registered in the corresponding period last year.

Bank deposits, meanwhile, rose 8.5% to Rs 147.27 lakh crore between April and December, compared with an increase of 5.1% a year ago, according to data released by the Reserve Bank of India.

An aversion to risk after the onset of the coronavirus pandemic probably contributed to the increase in bank deposits.

In the fortnight ended Jan. 1, 2021, the year-on-year growth in bank credit was 6.7% and 11.5% in deposits, the data showed.

CARE Ratings in a recent report said bank credit growth has returned to the levels observed in early months of the pandemic -- average bank credit growth in March and April 2020 was around 6.5 per cent.

Credit growth in the fortnight ended Jan. 1 increased compared to previous fortnight, led by an increase in retail loans.

However, the credit growth remained marginally lower compared with the year-ago period reflecting subdued demand and risk aversion in the banking system.

Lenders are being selective with their credit portfolios due to asset quality concerns, the rating agency said.

According to the recent Financial Stability Report of the RBI, under a baseline stress scenario, gross non-performing assets of all banks may rise to 13.5% by September 2021, which would be the highest in over 22 years, from 7.5% in September 2020.