Lower bank lending rates can spur consumption demand

By: | Published: May 13, 2016 6:02 AM

Industrial demand for credit is likely to remain weak due to low utilisation and weak export growth

Industrial demand for credit is likely to remain weak due to low utilisation and weak export growth. A report by Bank of America Merrill Lynch says most of the expected uptick in credit supply will have to be absorbed by retail consumers.

This segment is dominated by housing and vehicle loans, disbursals to which would continue to grow rapidly.

The report points out that the potential for the supply of credit from the RBI to exceed demand from banks means bank lending and deposit rates can fall more than current consensus. Falling rates would also push aggregate demand and can help boost GDP growth.

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