Bank Credit Grows At Slowest Pace In More Than Two Years
Net bank credit in the fortnight ended Feb. 14, 2020 rose 6.4 percent compared with 7.1 percent in the fortnight ended Jan. 31.
Bank credit grew at its slowest pace in more than two years in the latest fortnight even as several high-frequency indicators showed signs of an economic revival.
Net bank credit in the fortnight ended Feb. 14, 2020 rose 6.4 percent—the slowest pace since September 2017—compared with 7.1 percent in the fortnight ended Jan. 31, according to data released by the Reserve Bank of India.
Growth in deposits, though slowed from 9.9 percent in the previous fortnight, remained above the credit growth at 9.2 percent during the reported period, the RBI data showed.
Credit growth fell despite the government’s efforts to push bank credit to ease the flow of funds in the economy and the central bank’s measures to improve transmission to lower interest rates. That means the improved services and manufacturing activity and an expected modest pick up in growth in the third quarter is yet to translate into higher demand for credit. This comes ahead of GDP figures for the October-December 2019 quarter, due to be released on Friday.
Crisil Ratings Ltd., however, said the prolonged slowdown in bank lending might be bottoming out this fiscal. Gross credit offtake is set to rise 8-9 percent annually in the next financial year compared with the likely growth of 6 percent this fiscal, the rating agency said in research note dated Feb. 25.
Crisil expects some growth in the January-March 2020 quarter on account of the fiscal year-end. A gradual pickup in economic activity, continuing demand for retail loans and strong growth in lending by private sector banks should also drive the uptick next fiscal, it said.