Economy

Credit drops ₹21,000 cr., deposits surge ₹1.27 lakh cr. in a fortnight

Lockdown takes a toll on demand for loans

The over 50-day lockdown has taken a toll on loan demand with advances of scheduled commercial banks contracting by ₹21,000 crore for the fortnight ended May 8, according to latest data released by the Reserve Bank of India (RBI).

In the previous two fortnights, ended on April 24 and April 10, loans contracted by ₹1 lakh crore [see table].

This was the third straight fortnight in which credit growth contracted.

Deposits, on the other hand, increased by more than ₹1.27 lakh crore, the data showed.

Loan demand failed to pick up even after the Reserve Bank of India reduced the key interest rate, or the repo rate, by a sharp 75 basis points (bps) in March when the lockdown started. Deposits, however, have grown despite banks having reduced fixed deposit rates significantly.

Earlier this month, State Bank of India (SBI), the country’s largest lender, lowered the retail term deposit rates by 20 bps for all tenures up to three years. The new rates came into effect from May 12.

Meanwhile, Finance Minister Nirmala Sitharaman will meet chiefs of public sectors banks and other financial institutions like Nabard and SIDBI on March 22 to sreview credit flows.

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Printable version | Jun 1, 2020 3:00:48 PM | https://www.thehindu.com/business/Economy/credit-drops-21000-cr-deposits-surge-127-lakh-cr-in-a-fortnight/article31635264.ece

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