With the unlocking process on course, festival season is expected
to lead to further rise in demand for credit.
The bank credit
growth on a year-on-year basis inched up to 5.66 per cent in the fortnight
ended October 9 from 5.14 per cent in the previous fortnight. The rise in
commercial banks' credit growth is in sync with the elevated business activity
at the end of the second quarter. Sequentially, credit showed some signs of a
pick-up, according to the Reserve
Bank of India (RBI).
RBI data showed
that bank
credit rose by Rs 72,357 crore to Rs 103.43 trillion in the October 9
fortnight after expanding by Rs 44,210 crore in the previous fortnight. The
credit of commercial banks had stood at Rs 97.89 trillion in the comparable
fortnight last year (as on October 11, 2019). The year-on-year growth in credit
had been 8.8 per cent last year.
With the unlocking
process on course, festival season is bring in a rise in demand for credit. The
credit demand has been hit badly due to a sharp contraction in the economic
activity following the Covid-19 pandemic. India's Gross Domestic Product (GDP)
shrank by 23 per cent in the quarter ended June 30, 2020.
Early this week,
Rajkiran Rai G, the newly elected chairman of the Indian Banks’ Association
(IBA) said credit demand was expected to be much better in the second half of
the financial year (October 2020-March 2021). Credit is growing at five-six per
cent (year-on-year basis) at the system-level at present. "We can see a
slight improvement -- closer to eight or nine per cent -- by March 2021,"
he said.
"Actually
overall in the first half, except for two-three months of lockdown, sanctions
were substantial. But the utilisation of working capital fund has been quite
low. It (working capital demand) expected to pick up now," Rai said.
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