Covid-19 crisis: Bank credit shrinks by over Rs 54,000 cr in August

Reeling beneath extreme demand destruction as a consequence of Covid-19 pandemic, Financial institution credit score in India shrunk by over Rs 54,000 crore in August to Rs 102.11 trillion (August 28, 2020). The excellent credit score was at Rs 102.65 trillion as on July 31, 2020.

In accordance with Reserve Financial institution of India (RBI) knowledge, the year-on-year development in credit score was 5.5 per cent for the fortnight ended August 28, 2020, similar tempo seen within the earlier fortnight (August 14, 2020). The credit score development was in double digits (10.2 per cent – August 30, 2019) in the identical interval final yr.

CARE Score, in a press release mentioned the slowdown replicate weak demand and danger aversion within the banking system.

The month of August 2020 noticed additional easing of restrictions imposed to include Covid-19 pandemic and banks stepped credit score disbursals to micro, small and medium enterprises (MSMEs) beneath government-guaranteed credit score scheme. But, the incremental credit score development is weak, bankers mentioned.

CARE mentioned moreover, the scheduled Industrial Banks are cherry choosing their credit score portfolios with warning as a consequence of asset high quality considerations. With financial actions remaining subdued, the general financial institution credit score is anticipated to stay slower within the close to time period, it mentioned.

India’s financial development took a extreme knock within the first quarter of the present monetary yr (Q1FY21) with the gross home product (GDP) shrinking by 23.9 per cent in April-June 2020 (Q1Fy21) within the aftermath of Covid-19 pandemic.

The banks garnered little over Rs 15,000 crore in deposits in August. Banks added about Rs 96,255 crore in fortnight ended August 28, 2020 whereas they’d seen decline of Rs 80,849 crore within the earlier fortnight (August 14, 2020). The excellent deposits of banking system had been at Rs 141.76 trillion (August 28, 2020) as in opposition to Rs 141.61 trillion (July 31, 2020).

The year-on-year development in deposits was 10.9 per cent, a shed decrease than 11 per cent clocked within the earlier fortnight. The tempo of development in deposits is on par with pattern in the identical interval final yr.

With widening hole in tempo of deposit acceration and mortgage growth, the credit score to deposit ratio (CD) has been falling each fortnight. The CD ratio was 72.03 per cent on August 28, 2020, down from 73.48 per cent in early June 2020, RBI knowledge confirmed.

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