The y-o-y credit growth rate for the current fortnight increased when compared with the y-o-y credit growth rate in the previous month due to the base effect and as restrictions eased gradually across select regions in India, CARE Ratings has said.
"If compared with previous year, credit growth rate improved to 6.5% (5.8% for fortnight ended July 17, 2020)," CARE Ratings has said in its latest report.
In absolute terms, credit offtake increased by Rs.6.6 lakh crore over the last twelve months but declined by Rs.0.4 lakh crore as compared with the previous month. The bank credit growth continues to remain subdued as compared with the period prior to pandemic, which can be ascribed to risk aversion (both lenders and borrowers) which has resulted in continued parking of excess liquidity with RBI.
"The retail and agriculture sectors have continued to drive the overall credit growth (double-digit y-o-y growth in the month of June 2021). Whereas negative growth in industry and slower growth in services segments (excluding the MSME segment) restricted the overall credit growth. The lower credit offtake by industry and the service sector can be attributed to lower borrowing by businesses as good quality borrowers have shifted to capital markets (corporate bond issuance was higher by 27% in June 2021 as compared with issuances in May 2021 as per provisional data from prime database), consequent to restrictions under the pandemic's second wave," the ratings agency has observed.