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Banks continue to lend less even as deposit growth improves, credit growth now at mere 6.5%

Banks continue to lend less even as deposit growth improves, credit growth now at mere 6.5%

Risk-averse banks have continued to lend less and less to customers despite the double-digit growth seen by bank deposits. The overall credit growth rate in the banking sector for the fortnight ending May 8 stood at 6.5%, while the bank deposit growth rate was at 10.6%, according to Care Ratings. “The credit growth further moderated during the last two fortnights to 6.7% and 6.5% levels compared to a year-ago level of 13.0% (as of May 10, 2019). The declining trend in credit growth continued since the quarter ended March 2019 owing to the rise in risk aversion in the banking system and the lockdown due to COVID-19,” Care Ratings said in a report.

Credit growth rate in the banking sector was higher than the deposit growth rate until June 2019, according to data provided by Care Ratings. Since then the credit growth rate has continued to fall while the deposit rate has taken the complete opposite path. Since March 2019, bank deposit growth rate has jumped slightly over 1% while the credit growth rate has tanked over 7%. The banking system continued to remain in a liquidity surplus of more than Rs.5.45 lakh crore during the week ended May 8, according to the report.

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