Coronavirus outbreak: Bank credit growth falls sharply to 6.1% in FY20

Facing the twin issues of an economic slowdown and the Covid-driven lockdown, the pace of bank credit growth fell sharply to 6.1 per cent in FY20, from13.3 per cent in FY19.
 

Deposit accretion activity also moderated in FY20 to 7.9 per cent from 10 per cent in FY19, according to Reserve Bank of India (RBI) data. While banks faced the slowdown impact throughout the year, the Covid blow came in the final month of the financial year.
 

The effect of the latter is expected to reverberate and perhaps become more pronounced in FY21. Scheduled commercial banks in India dispensed Rs 6 trillion in loans during FY20, much lower than the Rs 11.46 trillion disbursed in FY19.

 

 

The outstanding credit stood at Rs 103.7 trillion on March 27. Banks raked in deposits worth Rs 9.97 trillion in FY20, against Rs 11.4 trillion in the previous financial year. Outstanding deposits were Rs 135.71 trillion, shows RBI data.
 

Referring to the subdued pace of credit growth, the RBI in its monetary policy report said that both low momentum and unfavourable base effects were responsible.
 

The seasonal decline in credit growth during Q3FY20 was more pronounced than the corresponding period last year, while the offtake during Q4FY20 (up to March 13) was subdued as compared to the corresponding quarters of the previous two financial years.
 

The slowdown in credit growth was spread across banks, especially private ones. Credit growth of public sector banks (PSBs) and foreign banks remained modest, despite some uptick by PSBs of late.