The last two fortnights have been bad for bank credit growth. The growth rate decreased rapidly to 5.8% and 5.7%. Last year’s growth rates were recorded at 8.0% and 7.9% in November 2019 and December 2019 respectively. Due to COVID-19, the banks saw huge loss rates and this is one of the reasons why the bank credit growth saw a huge dent. This decline in growth credit also reflected the subdued demand as compared to the demand of last year and the risk aversion that is prevalent in the banking system particularly towards the corporate segment.
CARE Ratings, a rating agency mentioned that flat growth rates continued to be recorded in the fortnight that ended 4 December 2020. The rating agency said that it is due to the subdued credit offtake that the bank credit growth rate remained stagnant. At the same time considering the asset quality, banks had been very cautious with the overall credit portfolio. But due to the disbursements under the ECLGS scheme, the bank credit growth had to face the backlash. Deposits showed an increase of 11.3% as compared to the 10.3% growth in the last fiscal. In the last fortnight too, 10.9% was recorded. Furthermore, on December 4, 2020, the banking system saw the liquidity surplus at Rs. 5.8 lakh crores.
The Government borrowings restricted the banking system liquidity surplus and it is due to this reason that the liquidity is expected to stay in a surplus position. Also, the increase in the growth rate of deposits against the decline in the growth of the bank credit is helping the banks remain stable and upright in the market. The banks are further confident that their credit growth will soon increase and reach the pre-covid levels. Each bank is doing its part in establishing a stable income for them and providing maximum comfort to its customers.
