Bank credit growth increased as compared to previous fortnight ended January 29, 2021
The bank credit growth increased last month and returned to the levels observed in the early months of the COVID-19 pandemic. According to a recent research report by CARE Ratings, the bank credit growth was found to be 6.6 per cent year-on-year in February, higher than 6.4 per cent recorded in the same month last year. The growth has returned to levels observed in early pandemic months as the bank credit growth ranged between 6.5 per cent to 7.2 per cent during April 2020). The bank credit growth increased, compared to the previous fortnight ended January 29, 2021, which can be ascribed to an increase in retail loans, led by declining weighted average lending rates. (Also Read: Credit Growth Of Banks Remains Flat In Near Term: Report )
On a month-on-month basis, the credit growth remained marginally higher, compared to the same period last year. The credit growth was 6.4 per cent during the fortnight ended February 14, 2021. The report added that as of February 12, 2021, the liquidity surplus in the banking system stood at Rs.6.2 lakh crores. The liquidity surplus in the banking sector can be ascribed to the deposit growth outpacing credit growth persistently.
However, the government borrowings (including central government borrowing at Rs.26,000 crores and the state government borrowing at Rs.37,827 crores) limited the banking system’s liquidity surplus during the fortnight. Moreover, the banking system liquidity is expected to remain in a surplus position cushioned by the sustained growth in bank deposits as against the slower growth in the bank credit.