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Growth in non-food credit fell further in April, clocking 5.4% year on year (YoY) for the fortnight ended April 9 from 5.54% YoY in the previous fortnight. Slower growth in credit coincides with a fresh surge in coronavirus infections across India, which has led to bankers turning wary about lending.
According to analysts at Care Ratings, this is the first time the y-o-y growth rate has fallen in the first month of a new financial year in the last five years, reflecting subdued credit demand amidst the rising second wave of the pandemic. A year ago, non-food credit growth stood at 7% YoY.
As on April 9, outstanding non-food credit stood at Rs 108.39 lakh crore, showed data released by the Reserve Bank of India (RBI). Deposit growth slowed to 10.94% YoY from 11.39% in the previous fortnight. The value of bank deposits was Rs 152.15 lakh crore as on April 9.
Banks have already started hinting that they will turn more cautious in extending loans. On Saturday, ICICI Bank told analysts in a post-results call that it will, “calibrate [its] growth in the near term based on the operating environment and conditions resulting from the second wave of the Covid-19 pandemic.”
In this year’s surge in the case load, the concern is not as much around asset quality as around loan growth. In a note dated Monday, Nomura Group said major banks have greater capacity to absorb asset quality losses, if any from the second wave. “But the poor economic sentiment is mirrored in weaker loan growth, which is likely to remain tepid until the impact of COVID-19 is fully minimised,” the broking firm said. Consumer loan growth has come off for quite a few countries and India will not be too different, it expects. “On the contrary, non-financial commercial loan growth had picked up in other countries unlike in India, and may point to higher fiscal support to industries in other countries versus a strong deleveraging trend in India over the past five-six years,” Nomura added.
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