Credit growth of banks dropped to 4.32% in the fortnight to April 28. This is much lower than the 63-year low level of 5.08% in the financial year 2016-17. As per the Reserve Bank of India data, in the reporting fortnight, credit growth of banks crashed down to Rs 7,545 crore as compared to Rs 7,232 crore last year.
For the fiscal ended March 2017, credit growth had plunged to a multi-decadal low of 5.08% with outstanding loans at Rs 7,881 crore as compared to Rs 7,501 crore on April 1, 2016. The credit growth in the financial year 2016-17 is the lowest since 1953-54 when it had inched up by a paltry 1.7%.
However, loan growth had slightly increased to 5.52% in the fortnight to April 14 to Rs 7631 crore. Even then the cumulative growth for the first month of the new financial year is only 5.3%. Low credit growth is mainly due to high bad debt and weak corporate demand and also due to increasing use of debt from corporate bond markets, where the rate of interest is much cheaper than what banks are offering.
For the reported fortnight, growth of bank deposits also slowed 10.33% to Rs 10,509 crore as compared to Rs 9,525 crore in the fortnight ended April 29, 2016. In the previous fortnight, bank deposits had grown by 11.59% to Rs 10,591 crore due to the large flow of funds into the banking system after the note-ban last November.