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Indian banking system loan growth continues to be tepid even as some pockets like loans to retail and medium sized firms picked up in September.
Bank loans rose 5.1 per cent ( year-on-year) to Rs 102.2 lakh crore as of October 23, according to the latest RBI data. Overall loan growth has remained below the 6 per cent mark ever since the economy went into a lockdown following the COVID-19 pandemic.
Several regulatory and policy measures, easing liquidity conditions, lowering of policy rates and the easing of lockdown conditions have helped revive credit demand in certain sectors. Loans to medium enterprises rose 14 per cent, loans against shares and securities rose around 20 per cent, according to the latest data on sectoral deployment of bank credit until September. Besides, housing loans and other retail loans are also picking up, data indicated. But
"Bank lending rates to the productive sectors including housing have declined and a robust revival, however, would depend on the revival of demand," said external member of the monetary policy committee (MPC) Shashank Bhide in the latest minutes. "Revival of consumer demand would require restoration of confidence in the safety in participation in normal economic activities and availability of health care. Public investment in improving infrastructure to achieve these goals would help build consumer confidence"
Even as central bank has lowered key policy repo rates by 140 bps (basis points, one bps is 0.01 %)), these rates have transmitted only on short-term rates. While loans for project investments are linked to long term rates, which continue to be high. "I believe that excessively high long term rates are inflicting damage to the economy" said external MPC member J R Varma. " A significant part of the easing of policy rates is not being transmitted to longer term rates that form the benchmark for corporate borrowing and investment decisions. Excessive long term rates exacerbate the collapse of investments in the economy"
Bank loans rose 5.1 per cent ( year-on-year) to Rs 102.2 lakh crore as of October 23, according to the latest RBI data. Overall loan growth has remained below the 6 per cent mark ever since the economy went into a lockdown following the COVID-19 pandemic.
Several regulatory and policy measures, easing liquidity conditions, lowering of policy rates and the easing of lockdown conditions have helped revive credit demand in certain sectors. Loans to medium enterprises rose 14 per cent, loans against shares and securities rose around 20 per cent, according to the latest data on sectoral deployment of bank credit until September. Besides, housing loans and other retail loans are also picking up, data indicated. But
"Bank lending rates to the productive sectors including housing have declined and a robust revival, however, would depend on the revival of demand," said external member of the monetary policy committee (MPC) Shashank Bhide in the latest minutes. "Revival of consumer demand would require restoration of confidence in the safety in participation in normal economic activities and availability of health care. Public investment in improving infrastructure to achieve these goals would help build consumer confidence"
Even as central bank has lowered key policy repo rates by 140 bps (basis points, one bps is 0.01 %)), these rates have transmitted only on short-term rates. While loans for project investments are linked to long term rates, which continue to be high. "I believe that excessively high long term rates are inflicting damage to the economy" said external MPC member J R Varma. " A significant part of the easing of policy rates is not being transmitted to longer term rates that form the benchmark for corporate borrowing and investment decisions. Excessive long term rates exacerbate the collapse of investments in the economy"
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4 Comments on this Story
 | Hemant Pisat18 minutes ago Pramendra, your comment precisely depicts the mood in the economy. |
 | Sajal Kumar Roy19 minutes ago How can RBI expect that loans will grow when the banks are not lending. Banks have put in stringent rules which were not there earlier. |
| Pramendra Khokher37 minutes ago Sadist of RBI to expect people to pick up such expensive loans with a fractured economy. First, they should ensure that the banks & NBFCâ s are honestly giving loans at a good rate and on fair terms. Also, existing borrowers should be passed on the benefit of reduced rates so that they can muster up courage to borrow more. Expecting the industry to do all the stepping up in the face of all unclear business odds, unscrupulous bankers, Shylock NBFCâ s, self-centered RBI, a delusional government, self-serving bureaucrats, petty minded politicians & a police system that firmly believes all businessmen are crooked, is a bit too much to ask. |