Credit growth hits a new low, slips to 8.1% in FY 2016-17: Report

Deepening the crisis prevailing in the banking segment, the credit growth of all banks have now slipped to 8.1 per cent in 2016-17 from 10.9 per cent in the previous year, stated a report by Dun and Bradstreet.

Despite the growth reported in the aggregate deposits due to the massive flow of funds post demonetisation, credit growth recorded a dip.

“The credit growth of all scheduled commercial banks slowed down from 10.9 per cent in 2015-16 to 8.1 per cent in 2016-17. The growth in aggregate deposits, on the other hand, improved from 9.3 per cent in 2015-16 to 15.9 per cent in 2016-17, largely on account of a massive flow of funds into the banking system after the demonetisation of November 2016,” the report titled ‘India’s Top Banks 2017’ noted.

The report further revealed that the banks’ non-performing assets (NPAs) continued to display the highest level of stressed advances.

“The gross non-performing advances (GNPA) of banks rose to 9.6 per cent in March, 2017 from 7.5 per cent in March 2016. The net NPA ratio of banks stood at 5.5 per cent in March 2017,” the report suggested.

“At present, the Indian banking sector is going through a critical phase. The credit growth has remained subdued, particularly in the case of public sector banks. Increase in stressed assets has affected the profitability of banks and therefore, deteriorating asset quality means a major challenge for the banking industry,” said Manish Sinha, Managing Director- India, Dun and Bradstreet.

The banking sector in India has been facing a lot of challenges, namely degradation in asset quality and steep decline in credit off take.

“In 2016-17, the aggregate total income of the 68 profiled banks stood at Rs 11.5 trillion, reflecting a 6.7 per cent growth. The total income of private sector banks grew by a healthy 15.8 per cent during the year, as against a modest growth in public sector banks (3 per cent) and foreign banks (5.8 per cent),” it said.

“The aggregate value of Net Interest Income (NII) of profiled banks rose by 6.4 per cent to Rs 3,284.8 billion. Private banks reported a 15.7 per cent growth in NII, as against a flat performance by public and foreign banks,” the report stated.