Bank credit contracts by ₹69,000 cr. in a fortnight

Loans of commercial banks contracted by a whopping ₹69,340 crore in the fortnight ended April 24, 2020 as economic activity came to a grinding halt following a nationwide lockdown.

In the last two fortnights, outstanding advances of commercial banks declined by a staggering ₹1 lakh crore, latest data from the Reserve Bank of India (RBI) showed.

No rate cut impact

This indicates the 75 basis point repo rate cut to 4.4% by the RBI at end March had no impact on generating loan demand. Besides, the RBI had ensured adequate liquidity in the banking system. However, banks continued to park money with the RBI which was more than ₹8 lakh crore as on May 6. Deposits also contracted during the fortnight by ₹3,932 crore.

Meanwhile, Goldman Sachs expects the central bank to reduce the repo rate further to revive economic growth. “Under our economic forecast of sharply-below-trend growth in FY21, and headline inflation within the central bank's target band, the RBI should be able to reduce rates further,” the brokerage said.

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Printable version | Dec 5, 2020 3:29:12 PM |

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