Credit growth plunges to even lower than FY17 level to 4.3%

The new financial year began on a sour note for bank credit growth, which slipped to 4.32% in the fortnight to April 28, much lower than the 63-year low level of 5.08% in FY17, the latest RBI data showed.

In the reporting fortnight, credit grew at an anaemic 4.32% to Rs 75.45 trillion as against the Rs 72.32 trillion in the same period.

For the financial year ending in March 2017, credit growth had plunged to a multi-decadal low of 5.08% with outstanding loans at Rs 78.81 trillion as against Rs 75.01 trillion on April 1, 2016. The lowest recorded credit growth was in the financial year 1953-54, when it grew at a pale 1.7%.

However, loan growth had marginally risen to 5.52% in the fortnight to April 14 to Rs 76.31 trillion. Even then the cumulative growth for the first month of the new financial year is only 5.3%.

Low credit growth is due to high bad debt and weak corporate demand, and also due to increasing use of debt from corporate bond markets, where the rate of interest is much cheaper than what banks are offering.

In the reporting fortnight, bank deposits growth also slowed to 10.33% to Rs 105.09 trillion compared to Rs 95.25 trillion in the fortnight ended April 29, 2016.

In the previous fortnight, bank deposits had grown by 11.59% to Rs 105.91 trillion.

Banks have seen a rise in deposits due to the large flow of funds into the banking system after the note-ban last November.