InvestorQ : Is bank credit now growing or is it still under pressure?
vaishnavi mhatre made post

Is bank credit now growing or is it still under pressure?

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vidhya Laxmi answered.
6 months ago
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While there is no fall in bank credit any longer, the growth is yet to get back to pre-COVID levels. This was ratified by the latest RBI data. The data showed that bank credit growth decelerated to 5.8% in the Sep-20 quarter from a high of 8.9% last year.

This slowdown can be largely attributed to the lag effect of the COVID pandemic. However, the aggregate deposits for Sep-20 quarter were up by 11% yoy compared to 10.1% growth a year ago. Even as credit growth is tepid, deposits base is building up.

The slowdown in bank credit growth was evident across rural, semi-urban, urban and metropolitan clusters. The good news was the growth in CASA deposits which was up 110 bps to 42.3%. CASA matters as it entails lower cost of servicing deposits.

As a result of this divergent movement of credit and deposits, the credit-deposit or C/D ratio fell by 110 bps to 72% in the Sep-20 quarter. The C/D ratio was much better for metropolitan branches at 88.4%. However, the industrialized states like Tamil Nadu, Andhra Pradesh and Chandigarh experienced more than 100% C/D ratios.

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