Credit offtake by banks slowly back to double digits after nearly 15 months

invest1_bccl Demand for bank loans is slowly picking up, latest data from the Reserve Bank of India indicated. Annual year-on-year (Y-o-Y) growth rate in credit offtake is slowly inching back to double digit levels after nearly 15 months

Total bank credit rose 9.9% to Rs 81 lakh crore in the fortnight ending December 22’17, latest RBI data shows. Analysis of sequential fortnightly growth shows that there has been a slow pick up in loans since late August.

“As the economy picks up the demand for credit should go up and there is enough supply to ensure that lack of credit is not in the way of supporting higher growth. So, the uptick in credit growth has already happened” RBI governor Urjit Patel said at the post policy media conference early December’17.

Banks have also started lowering lending rates. With the country’s largest bank lowering lending rates to existing borrowers, it is expected that this benefit may also be passed on to new borrowers to improve transmission of policy rates.

The Reserve Bank lowered its benchmark repo rate by 25 bps to 6% in its August 2016 policy statement so that banks could lower lending rates to incentivise borrowings. But loan demand has been muted as new projects were not coming upi n a big way.

Banks have also been cautious in lending to large corporates on asset quality concerns, but have been growing their loan book by lending to retail.

 

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