Rising real lending rates causing steep fall in credit flows, GDP: Report

The brokerage had last month penciled in 5 to 7.5 per cent contraction in GDP this fiscal, saying each month of lockdown has shaved off 100 bps of the economy

Even after the Reserve Bank has slashed the key interest rates by 135 basis points (bps) since February this year, the real lending rates have only gone up by 44 bps in spite of nominal lending rates falling by 105 bps during the same period, says a report.

According to the house economists at BofA Securities India, this high lending rate is the main reason for the steeply falling credit flows, which conversely also point to a deeper GDP contraction, accentuated by the pandemic.

The brokerage had last month penciled in 5 to 7.5 per cent contraction in GDP this