Bank Lending Shrinks by Rs 1.1 Lakh Crore

The bank lending has shrunk by a whopping 1.1 lakh crore entirely because of loans to individuals and MSMEs. In the personal segment this shrinking amounts to about 63,000 crore and for micro and small enterprises the same is nearly 50,000 crore as a result of just four weeks (till April 24) due to the lockdown.

The sharpest drop has been witnessed in the personal segment with the middles class borrowing through credit cards. Outstanding and advances against fixed deposits have also seen a fall of over 10%. Bank lending

A decline of Rs 62,861 crore was recorded by the personal loan segment because of people mostly restricting their online spending. Banks lending to micro and small enterprises have also shrunk by 4.2% in the four weeks accounting to Rs 11 lakh crore against the previous Rs 11.49 lakh crore.

The drop can be explained by the shutting down of all non-essential retail outlets as well as online deliveries. To help and aid the banks in overcoming this risk aversion, the government has launched a scheme to provide loans to businesses having an outstanding credit limit of Rs 25 crore and above.

The banks are looking forward to growing their MSME books by nearly 20% on the basis of the guarantee provided under the scheme. The drop in bank lending is expected to not be permanent as the nation has already lifted up the ban on non-essential items which will again result in generating robust demand among the Indian consumers. However, the sudden rise and fall in demand may lead to some other adverse implications on the economy as a whole.

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