The pace of year on year growth in commercial bank credit more than halved to 7.1 per cent at end fortnight (December 20, 2019) from 15.11 per cent a year ago, data released by the Reserve Bank of India revealed.
Between December 6 and December 20, lenders disbursed Rs 12,519 crore, taking outstanding of scheduled commercial Rs 99.47 trillion, according to Reserve Bank of India data. On the other hand, the deposits in the same period increased 9.09 per cent to Rs 130.08 trillion by the end of December 20. However, in the fortnight between December 6 and December 20, the deposits decline 0.7 per cent.
Bankers said that with private investment practically coming to a halt, there was little demand for corporate credit. While activity may show an uptick in the second half, it will hardly compensate for the extended slowdown seen since the beginning of the year. Companies are battling stress and are deleveraging wherever possible. The retail segment is showing steady growth, but it is not in a position to make up for the slump in the industry segment.
Rating agency ICRA in a report last week had said, with the Indian economy caught in a slowdown, bank credit is expected to expand at a muted 6.5-7 per cent in 2019-20 (FY20) from 13.3 per cent in FY19.
This will be the lowest in 58 years, mainly on account of lower working capital requirements by companies and risk aversion among lenders. According to ICRA, even in a high-growth scenario, wherein the second half of FY20 sees the incremental bank credit rise to
Rs 6.5-7 trillion, there will still be a 40-45 per cent year-on-year (YoY) decline.