Note ban effect: Low base lifts banks' credit growth to 10.65% in December

The base figures are getting revised due to the demonetisation drive and that is where you are seeing the growth, said SBI's P K Gutpa

After a long gap, credit growth grew in double digits to 10.65 per cent at Rs 80.97 trillion in the fortnight ended December 22, 2017, due to the base effect, according to data from the Reserve Bank of India (RBI). 

The advances had stood at Rs 73.17 trillion in the fortnight ended December 23, 2016.

"The credit growth is mainly because of the base effect. Due to the demonetisation last year, the base figures are getting revised and so that is where you are seeing the growth," State Bank of India's Managing Director (retail and digital banking) P K Gutpa said. 

He said there is a revival in demand for retail credit but corporate credit continues to be muted.

"We are seeing revival of demand on the retail front. In December, we had record auto loans booked by us. Similarly, we saw a higher number of housing loans booked by us during the month," Gupta said.

The recently released Financial Stability Report showed that the credit growth of scheduled commercial banks, on a year-on-year (y-o-y) basis, increased from 4.4 per cent to 6.2 per cent between March and September 2017.

The public sector banks' credit growth increased from 0.7 per cent to 2.2 per cent during the same period, reversing the declining trend observed during the past two years.

The growth in credit in the reporting period was slightly higher than the previous fortnight ended December 8, 2017.

In the previous fortnight, the banks' advances had grown by 9.77 per cent to Rs 80.27 trillion from Rs 73.12 trillion in the year ago period.

In the reporting fortnight, banks' deposits had risen by 3.96 per cent to Rs 108.85 trillion as against Rs 104.70 trillion in the period ended December 23, 2016, the data showed.

Deposits in the previous fortnight ended December 8, 2017, had grown by 3.32 per cent to Rs 109.02 trillion as against Rs 105.50 trillion in the period ended December 9, 2016.

The FSR had said deposit growth of scheduled commercial banks, on a y-o-y basis, decelerated from 11.1 per cent to 7.8 per cent between March and September 2017.

The decline in deposit growth is observed across all bank groups, the report said.