Loan growth falls below RBI projection

Banks’ loan growth fell below 18 per cent on a year-on-year basis for the first time in this financial year, with demand for credit showing no signs of pick up even as the busy season started.

According to the Reserve Bank of India (RBI) data, loan growth as on 28 October was 17.9 per cent. In October, loan book of banks shrank nearly Rs 60,000 crore. It fell from a high 21.4 per cent at the beginning of the financial year. So far, loan growth has been 5.5 per cent.

Banks also reduced their assets in October, with outstanding deposit in the system declining nearly Rs 70,000 crore and as a result year-on- year deposit growth fell to 13.5 per cent. With growth of retail deposits remaining healthy, banks have been shedding high cost bulk deposits to reduce their cost of funds. Loan growth has been tepid in the current financial year so far as interest rates remain high. RBI increased the repo rate 375 basis points in the last 20 months to control inflation.