The deposit growth in the banking system continues to be steady at 9.09% y-o-y, down 22 bps from the previous fortnight.
The non-food credit growth in the banking system for the fortnight ended March 13 stood at 6.07 % year-on-year (y-o-y), the lowest since May 2017. The lower credit growth comes despite a slew of measures announced by the Reserve Bank of India (RBI) to reduce the cost of borrowing for banks and boost credit offtake.
The year-to-date (YTD) credit growth between March 31, 2019, to March 13, 2020, stood at 3.64 %, against 10.72% a year ago. Outstanding loans to companies and individuals stood at Rs 100.8 lakh crore as on March 13. During the previous fortnight, the non-food credit growth stood at 6.29% y-o-y, against 14.4% a year ago.
The central bank has conducted auctions for long-term repo operations (LTROs) totalling Rs 1.25 lakh crore, which has reduced the cost of borrowing for banks. Further, a number of measures, including cash reserve ratio exemption on incremental lending to the auto, housing and MSME, by the RBI has yet to translate into significant credit growth. The liquidity in the banking system stood at Rs 2.17 lakh crore as on March 20, said CARE Ratings.
The deposit growth in the banking system continues to be steady at 9.09% y-o-y, down 22 bps from the previous fortnight. Total deposits came in at Rs 133.39 lakh crore, even as interest rates on deposits continue to fall. Owing to the Covid-19 pandemic, the credit growth is expected to take a further hit. Rating agency Icra said the y-o-y credit growth is estimated at 5-6% for FY20, which would be a multi-decadal low. “Slower credit growth and steady deposit growth drive liquidity in the banking system, with over Rs 3 lakh crore parked under reverse repo with the RBI for the last six months,” the agency said.
In a bid to reduce the stress of borrowers due to the pandemic, a number of public sector banks have extended emergency credit lines at softer terms that could help improve the credit growth in the system.