Credit growth slumps on rise in lending rates

Banks had raised lending rates after RBI hiked repo rate by 25 bps in the second quarter review of monetary policy held on Oct 29

The festive season factor notwithstanding, the impact of the recent rise in lending rates is apparent. Data released by the Reserve Bank of India (RBI) on Wednesday showed in the fortnight ended November 15, credit growth slowed to 15.48 per cent year-on-year, against 16.45 per cent in the previous fortnight. On a fortnightly basis, credit growth fell 0.16 per cent.

After RBI raised the repo rate by 25 basis points in the second quarter review of monetary policy on October 29, banks had raised their lending rates.

In the fortnight ended November 15, deposit growth stood at 15.35 per cent year-on-year. On a fortnightly basis, deposit growth fell 0.48 per cent.
 

The rise in deposit rates didn’t help attract deposits.

Bankers are optimistic credit growth will pick up in the near term, as will deposit growth.