MUMBAI: Bank credit growth is likely to remain moderate in the near term as lenders will continue to remain risk averse due to the pandemic-led uncertainty, says a report.
The overall bank credit growth in October 2020 continued to decelerate to 5.6 per cent. "The overall credit growth is expected to remain slower in the near term as banks are being selective in giving fresh loans due to asset quality concerns," Care Ratings said in a report.
It said though the interest rates of scheduled commercial banks (SCBs) are falling (by 115bps from October 2019 to October 2020), pickup in the incremental credit has not been seen. The services, retail and agriculture and allied segment registered a growth of 9.5 per cent, 9.3 per cent and 7.4 per cent respectively in October 2020.
Industrial segment registered a degrowth of 1.7 per cent during the same period as compared with a growth of 3.4 per cent in October 2019. Home loans, which have a large share in retail credit, registered growth of 8.2 per cent in October 2020 (lowest in last five years).
"This indicates though banks are offering various festive offers on home loans, individuals are not taking fresh loans (e.g. Kotak Mahindra Bank, Bank of Baroda, Axis Bank, HDFC Bank reduced interest rate by 10-15bps on home loans)," the report said.
The rating agency said the bank credit growth from May 2020 (Rs 91.08 lakh crore) to October 2020 (Rs 92.13 lakh crore) has been mainly supported by disbursements in the Emergency Credit Line Guarantee Scheme (ECLGS) scheme which is extended further till March 31, 2021.
In October 2020, disbursements under ECLGS scheme were Rs 1.52 lakh crore, which is higher than gross bank credit growth of Rs one lakh crore (in absolute terms from May 2020 to October 2020), it said.