Bank credit grew 3.2 per cent to Rs 107.05 lakh crore in the first nine months of the current financial year, as against a growth rate of 2.7 per cent registered in the corresponding period of 2019-20. In the fortnight ended March 27, 2020, bank advances stood at Rs 103.72 lakh crore.
Bank deposits rose 8.5 per cent to Rs 147.27 lakh crore in the April-December 2020 period, as against an increase of 5.1 per cent a year ago, according to the recent data released by the Reserve Bank of India (RBI).The sharp accretion in deposits during the year was due to the safe-haven appeal of banks.
In the fortnight ended January 1, 2021, the year-on-year growth rate in bank credit was 6.7 per cent and 11.5 per cent in deposits, the data showed.
CARE Ratings, in its recent report, had said the bank credit growth has returned to the levels observed in early months of the pandemic average bank credit growth in March and April 2020 was around 6.5 per cent.
The bank credit growth in the fortnight ended January 1, 2021, increased compared to last fortnight (December 18, 2020) which can be ascribed to an increase in retail loans. However, the credit growth remained marginally lower compared with the year-ago period (7.5 per cent as of January 3, 2020) reflecting subdued demand and risk aversion in the banking system.
Lenders are being selective with their credit portfolios due to asset quality concerns, the rating agency said.
With the economy taking a hit in the wake of the Covid pandemic and “a multi-speed recovery struggling to gain traction”, bad loans, or gross non-performing assets (NPAs), of the banking sector are expected to shoot up to 13.5 per cent of advances by September 2021, from 7.5 per cent in September 2020, under the baseline scenario, the Financial Stability Report (FSR) of the Reserve Bank of India (RBI) said.
The FSR has warned that if the macroeconomic environment worsens into a severe stress scenario, the ratio may escalate to 14.8 per cent. “A multi-speed recovery is struggling to gain traction, infusing hope, reinforced by positive news on vaccine development,” RBI Governor Shaktikanta Das said. “Nonetheless, a second wave and new mutations of the virus have spread heightened uncertainty, threatening to stall the fragile recovery,” he added.