According to the latest Reserve Bank of India (RBI) statistics, bank credit growth increased to 6.1 percent year on year for the week ended 3 July, despite a decrease in deposit growth. Bank credit grew by Rs0.9 lakh crore in the preceding fortnight due to progressive unlocking across states. Bank credit growth was 5.8 percent year on year as of June 18. The retail and farm sectors continue to fuel overall credit growth, but slower development in the industries and services sectors has limited total credit growth.
According to Care Ratings, bank loan growth has remained modest, owing to risk aversion and the continuing parking of surplus cash at the RBI.
"Credit growth for FY22 is projected to remain in the low double digits, with increase mostly expected in H2FY22, led by steady expansion in economic activity," the report stated.
The government's recent extra steps to alleviate pandemic-related concerns are likely to boost credit offtake. However, the negative risks include restricted capital expenditure plans, partial limitations in important areas, and concerns about the third wave, which may damage both the industrial and service industries, according to the rating agency.
Deposit growth, on the other hand, fell slightly to 9.8 percent in the two weeks ending July 2, 2021. Deposit growth in the preceding two weeks was 10.3 percent. Nonetheless, deposit growth is still lower than the previous year's 11.0 percent year on year increase. According to Care, bank deposits grew by almost 14 lakh crore over the previous year, reaching a record high in the last 24 years.
The liquidity excess in the banking sector stands at about Rs.6.0 lakh crores as of 2 July 2021. Deposit growth has regularly outpaced credit growth, resulting in a liquidity surplus. Excess liquidity is stored with the RBI under the reverse-repo window, where it earns little more than 3 percent, comparable to the savings deposit rate for banks.
Comments