The Growth in the loans comprising Agriculture and Allied Activities, for the Banking Industry dropped to its lowest growth rate in three years due to the covid-19 pandemic. The Non-food Credit rose to 5.81% year-on-year to Rs.101.33 lakh crore according to the reports released by the RBI (Reserve Bank of India). This is the lowest growth rate since July 2017, when the Growth Rate was at 5.79 %. The Credit Growth remains low in the Banks even when there is more than Adequate Liquidity Available with the Banks. The Bank Deposits Growth Continues to grow higher than the Bank Credit Growth. However, the Banks are also reluctant to lend to its customers due to the Uncertainity caused by the covid-19 pandemic and the subsequent Lockdowns imposed by the Government to curb the Spread of the Corona virus. For the Quarter ending June 20,2020 most large banks of the country reported slowing Credit Growth. India’s largest lender State Bank of India, reported that its Outstanding advances rose to 6.6% to Rs.23.85 lakh crores in its first quarter. ICICI Bank also reported a loan Growth of 6.5% year-on-year in the same period. The Bank of America Securities reported that the Slowdown in the Credit Growth indicates a struggling economy. Declining credit flow points to the contraction in the economy due to the covid-19 pandemic. The Bank of America securities Analysis showed a sharp drop in the credit flows across various time periods from time covid -19 pandemic began:
1.Between mid-march and July 17,2020, credit flow is 36% lower than the previous year
2.Between end-March and July 17, 2020, credit contraction is 52.2 % larger than 2019
3.Between end-April and July 17,2020 credit contracted by Rs.50,800 crore in contrast to offtake of Rs.44600 crore last year.
4.Between end-May and July 17,2020 credit flow contracted by Rs.2500 crore in contrast to offtake of Rs.42,300 crores last year.
The lower credit flow is visible in segments such as the retail trade and lending towards non-banking finance companies. Among the loans to industries, only large companies saw a growth in Outstanding Loans in the first three months of the current financial year.
