Decline in bank loan growth continues

Chennai, May 9

Loan growth during the second fortnight of this fiscal has been sluggish. According to the weekly statistical supplement of the Reserve Bank of India, bank credit for the fortnight ended April 25 was down by Rs 11,964 crore. But this is in line with the trend seen every year, when bank credit declines in the first quarter.

Some of the decline in bank loans is also attributable to the unwinding of the huge build-up in loans that takes place in the last fortnight of every fiscal (March end). The last fortnight is invariably the busiest – the numbers notched up in this fortnight usually account for about 20 to 25 per cent of the annual figures for each parameter.

For instance, in the last fortnight of March this year, bank loans grew by almost Rs 76,000 crore. That was about 18 per cent of the annual loan growth last fiscal.

Bank loans are growing at 23 per cent year on year and seem well matched with deposit growth that is currently at about the same level. There has been a noticeable slowdown in the rate of growth even in the last fiscal, following four years of 30 per cent growth.

The RBI had projected a growth of 20 per cent in credit and 17 per cent in deposits in this fiscal. These projections are in line with the lowered growth expectations of money supply at about 17 per cent in this fiscal compared to about 21 per cent last fiscal.

Taken from Business Line

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