Credit growth pertaining to the commercial banks may have bottomed out, expected to be 6 percent this financial year and in 2020-21. The growth is likely to improve to 8-9 percent, said the rating agency Crisil.
“The prolonged slowdown in bank lending may be bottoming out this fiscal, with gross credit offtake set to rise 8-9 percent on-year in fiscal 2021, a good 200-300 basis points (bps) over the likely growth of around 6 percent this fiscal,” revealed rating agency said.
As per the data published by the Reserve Bank of India, year-on-year credit growth till January 31 was at 7.1 percent as compared with the 14.5 percent during the same period of the previous financial year.
Crisil said a gradual pick-up in economic activity, continuing demand for retail loans and strong growth in lending by private sector lenders should lead the uptick.
“Recent policy moves announced in the Union Budget, and by the Reserve Bank of India are also expected to provide spur,” it said.
After cutting the interest rate by 135 bps during February and October 2019 are expected to boost loan demand, the RBI has taken measures namely infusing longer-term funds into banks at repo rate that is lower than the prevailing market, a move to bring down interest rates further.