Bank credit growth moderated further to 5.5 per cent during the fortnight ended July 31, from 5.8 per cent, in a month which saw an easing of restrictions imposed to contain the Covid-19 pandemic. Credit growth was in double digits (about 12 per cent) during the same period last year.
According to the Reserve Bank of India data, outstanding credit rose by Rs 46,777 crore during the period under consideration to Rs 102.65 trillion (as of July 31), as against a sharp contraction of about Rs 84,740 crore in the previous fortnight (ended July 17).
Bankers said business conditions have been improving, but only incrementally. Also, demand for credit remains weak and many people are repaying loans.
Banks have stepped up disbursals to micro, small & medium enterprises (MSMEs) under the emergency credit guarantee scheme. But it is expected to provide traction to credit growth gradually in coming months, said a senior public sector banker.
Banks continued to garner deposits at a fast pace over the period under consideration, with year-on-year growth of 11.1 per cent, up from 10.8 per cent in the previous fortnight. The pace of growth in deposits was at par with the trend seen during the same period last year.
The outstanding deposits of the banking system stood at Rs 141.61 trillion at the end of July 2020. With a widening gap in the pace of deposit accretion and loan expansion, the credit to deposit ratio (CD) has been falling every fortnight. The CD ratio was 72.49 per cent by the end of July, down from 73.48 per cent in early June, the RBI data showed.
