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Bank Credit Growth Decelerates On Subdued Demand

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The bank credit growth decelerated to 5.8% and 5.7% during the last two fortnights, compared to last year's level of 8.0% and 7.9%, respectively (as of November 22, 2019 and December 06, 2019) reflecting subdued demand (compared to a year-ago period) and risk aversion in the banking system especially towards the corporate segment, CARE Ratings has said in a report.

The rating agency has noted that the bank credit continued to record flat growth again in fortnight ended December 04, 2020 owing to subdued credit offtake.

 Bank Credit Growth Decelerates On Subdued Demand
 

"Also, given the asset quality concerns, banks have been very selective with their credit portfolios. However, the overall bank credit growth has been backstopped by disbursements under ECLGS scheme (the scheme has been extended further till March 31, 2021).

Deposits increased by 11.3% (as of December 04, 2020) vs. 10.3% in the year ago period (December 06, 2019) and 10.9% as compared with the previous fortnight (November 20, 2020). Moreover, as on December 04, 2020 the liquidity surplus in the banking system stood at Rs.5.8 lakh crores. The liquidity surplus can be ascribed to deposit growth outpacing credit growth persistently.

However, government borrowings (Central: Rs 72,000 crores and States: Rs 31,358 crores) limited the banking system liquidity surplus during the fortnight. Additionally, the banking system liquidity is expected to remain in a surplus position aided by sustained growth in bank deposits as against slower growth in the bank credit," the ratings agency said.

Read more about: bank banking
Story first published: Tuesday, December 22, 2020, 8:51 [IST]
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