Bank credit growth slows to Dec 2009-levels

On a y-o-y basis for the fortnight ended Aug 22 bank credit grew by 10.94% while it was 10.61% on Dec 4, 2009

The economic slowdown has led to the bank credit growth falling to its lowest level in about five years. The growth is near the levels last seen at the time when the economy was reeling under the global financial turmoil.

Reserve Bank of India (RBI) data showed that on a year-on-year basis for the fortnight ended August 22, the bank credit grew by 10.94 per cent. Bank credit grew by 10.61 per cent in the fortnight ended December 4, 2009.

Banks hope the credit growth would pick up in the coming festive season. Banks have even announced various schemes for this. These schemes are for retail loans and offer discounts on interest rates and processing fees for consumers.

Apart from discounts, banks have also increased tie-ups with retailers to boost credit card sale also. Typically, banks say that during the festival season, credit card spends increase by 20-25 per cent, as compared to the previous quarter.

Now that the credit growth is at a four-and-a- half-year low, banks are hoping that these schemes and offers might be able to woo consumers and result in a better credit offtake.

Usually, credit growth starts picking up in the second half of every financial year.

Even during the last festive season, credit offtake was slow. However, with the economy showing signs of improvement and the markets also inching up, lenders are hoping that credit offtake also might bounce back this year.

Deposits, on the other hand, grew 13.57 per cent year-on-year for the fortnight ended August 22.

Over the fortnight, the credit growth fell by 0.18 per cent, while deposits growth dropped 0.11 per cent, the data showed.