Credit growth slows after note ban

Banks lend Rs 60,000 cr in 8 weeks since Nov 8; Y-o-Y credit expansion slows further

In the eight weeks since demonetisation, banks have lent just over Rs 60,000 crore which is way below Rs 2,66,900 crore banks disbursed in the same period last financial year (FY16). 

According to Reserve Bank of India data, the outstanding loans of the banking systems stood at Rs 73,53,280 crore at end of November 11, 2016. It rose to Rs 74,13,415 crore by January 6, 2017.

Banks executives said while the demand for credit before November 8 was weak, the economic shock from demonitisation has further hit demand and business sentiment. 

The year-on-year growth in credit was 9.1 per cent before the decision to abolish legal tender status for old high value notes of Rs 500 and Rs 1,000 crore was taken on November 8. 

The pace of credit offtake slipped to 5.14 per cent by January 6, 2017.  

This has made many banks rework their credit growth targets for 2016-17. State Bank of India Chairman Arundhati Bhattacharya said earlier that her bank had indicated a credit growth of 11-12 per cent in FY17 which will now grow at 8-9 per cent. 

Private sector lender Axis Bank in its conference call after announcing third quarter results indicated moderation in credit growth for the current year. 

The story for deposits is exactly the opposite. Banks saw an elevated flow of deposits at Rs 4,69,371 crore in the eight weeks after demonitisation. The outstanding pool of deposits was Rs 1,05,84,171 crore as on January 6, 2017, up from Rs 1,01,14,800 crore.