Covid-19 crisis: Bank credit shrinks by over Rs 54,000 cr in August

According to Reserve Bank of India data, the year-on-year growth in credit was 5.5% for the fortnight ended August 28, 2020

Bank credit in India shrunk 0.5 per cent, or Rs 54,000 crore, in August to Rs 102.11 trillion (as of August 28, 2020), as the Covid-19 pandemic continues to hit demand for loans. The outstanding credit in the banking system was Rs 102.65 trillion as of July 31, 2020.
 

According to the Reserve Bank of India (RBI) data, the year-on-year (YoY) growth in credit was 5.5 per cent for the fortnight ended August 28, 2020, maintaining the pace seen in the previous fortnight. Credit growth was in double digits (10.2 per cent) in the corresponding period last year.
 

CARE Rating said this reflects weak demand and risk aversion in the banking system. August saw further easing of restrictions imposed to contain the Covid-19 pandemic and banks stepped up credit disbursements to micro, small and medium enterprises under the government-guaranteed credit scheme. Yet, the incremental credit growth is weak, bankers said.

 

CARE said scheduled commercial banks are also cherry-picking their credit portfolios with caution due to asset quality concerns. With economic activities remaining subdued, the overall bank credit is expected to remain slower in the near term, it said. India’s economic growth took a severe knock in the first quarter of the current financial year (Q1FY21) with gross domestic product shrinking 23.9 per cent.
 

Banks garnered a little over Rs 15,000 crore in deposits in August. The banking system had outstanding deposits of Rs 141.76 trillion (August 28), against Rs 141.61 trillion (July 31).
 

The YoY growth in deposits was 10.9 per cent, against 11 per cent in the previous fortnight. The pace of growth in deposits is on a par with the trend seen in the corresponding period last year.
 

The credit to deposit ratio of banks has been falling every fortnight, with the ratio at 72.03 per cent on August 28, down from 73.48 per cent in early June, the RBI data showed.