Credit Growth In Current Fiscal To Remain In Low Double Digits: Report

The economic slowdown can impact asset quality and delay the anticipated pick-up in the credit growth, according to Care Ratings

Credit Growth In Current Fiscal To Remain In Low Double Digits: Report

Bank credit growth rate is marginally lower compared with the previous fortnight

The credit growth for the current financial year 2021-2022 is likely to remain in the low double-digits due to muted economic activity amid the deadly COVID-19 pandemic, according to credit rating agency Care Ratings. The bank credit growth rate is marginally lower, compared with the previous fortnight and remained mostly stable, compared to the previous financial year. This is due to the risk aversion and the regional lockdowns imposed by states, in order to contain the spread of the virus amid the second wave of the pandemic, said the rating agency.

Several states have declared relaxation in lockdown or imposed a partial lockdown this month. The result of this on the bank credit will be known only after reviewing the additions in bank credit by the end of the month. Despite the low base effect of last year, when the country was under a complete lockdown due to the pandemic, the credit growth grew at a slower pace - at 6.3 per cent, compared to the fortnight ending June 5, 2020.

On the other hand, deposit growth remained at a similar level recorded in the previous fortnight - at 9.7 per cent growth for the fortnight ended May 21, and June 4 which is lower, compared to 11.3 per cent year-on-year growth registered in the year-ago period.

The Reserve Bank of India (RBI), in its monthly bulletin for June 2021, revealed that the second wave of COVID-19 may result in a loss of Rs 2 lakh crore in terms of output during the current financial year as the containment measures and the spread of infection in smaller cities, villages affected the rural demand.