Business

Bank credit shot up just before lockdown

A logo of RBI inside its office in New Delhi. File

A logo of RBI inside its office in New Delhi. File   | Photo Credit: Reuters

Loans grew by a whopping ₹2.31 lakh crore in the fortnight ended March 27, RBI data showed

Bank loans grew by a whopping ₹2.31 lakh crore in the fortnight ended March 27, indicating robust loan demand just when a nationwide lockdown was imposed to contain the spread of COVID-19, according to the RBI.

This was probably the highest fortnightly loan growth recorded in financial year 2019-20. The lockdown, that paralysed the economic activity, came into effect on March 25.

Soumya Kanti Ghosh, group chief economic adviser, SBI, had said in a report that the banks have witnessed a healthy credit demand in the last seven days of the financial year 2019-20.

“The good thing is that banks have witnessed good traction in credit (term and working capital requirements) in the last seven days of the year ending March 31, 2020,” Mr. Ghosh said in the report. “It seems companies/corporates are preparing themselves for a surge in demand after the lockdown period,” he added.

Bank credit shot up just before lockdown
 

Incremental offtake

The report had estimated the incremental credit offtake would have been ₹2,10,000 crore in March of which agriculture demand would have been ₹10,000 crore, industry ₹1,20,000 crore, services ₹60,000 crore and personal loans ₹20,000 crore.

“Clearly, the tide seemed to have turned as far as bank credit is concerned in March,” the report said.

Credit growth at nadir

Latest data released by the Reserve Bank of India (RBI) showed, credit growth for the year ended March 27 was 6.1%, one of the lowest in many years. Credit growth for the previous year was 13.3%. Deposit growth during the reporting fortnight was ₹2.31 lakh crore while the growth for the year was 7.9% compared with the 10% recorded in the previous year.

The central bank had also said that there were signs of growth picking up, in the monetary policy report released on Wednesday.

“Prior to the outbreak of COVID-19, the outlook for growth for 2020-21 was looking up,” the RBI said as it cited the bumper rabi harvest, transmission of monetary policy rates and reduction in GST rates.

“The COVID-19 pandemic has drastically altered this outlook,” the central bank added while refraining from providing any forecast on growth due to the uncertainties on how long will be the pandemic will continue.

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Printable version | Jul 6, 2020 6:07:55 AM | https://www.thehindu.com/business/bank-credit-shot-up-just-before-lockdown/article31312289.ece

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