Bikky Khosla | 15 Apr, 2019
Bank credit rose by 13.24 per cent
to Rs 97.67 lakh crore in the fortnight to March 29, while deposits grew by
10.03 per cent to Rs 125.72 lakh crore for the period, according to data
released by the Reserve Bank of India (RBI) last week. This is the second
consecutive double-digit credit growth after the same had declined to 4.54 per
cent in FY17 at Rs 78.41 lakh crore, which was the lowest since 1963. The news
to detail RBI data, loans to the services sector almost doubled with a 23.7 per
cent growth in February. This is encouraging. Similarly, credit to agriculture
and allied activities, infrastructure, chemical & chemical products and all
engineering sectors saw healthy growth. However, credit to industry rose by 5.6
per cent in February, up from an increase of 1 per cent. Also, overall there
was a loss in momentum as in the previous fortnight to March 15, credit demand
had grown by 14.46 per cent.
another development, while RBI delivered a second consecutive policy rate cut
recently, according to experts, tight liquidity conditions are likely to limit
banks' ability to cut lending rates. In contrast, the RBI Governor viewed that the
central bank may come out
with guidelines on transmission of rate cuts by banks to consumers.
He added that RBI will nudge
bank CEOs to pass on the benefit of lower policy rates. It will be
interesting to see how much of an impact RBI can have in this direction.
IIP growth dropped to a 20-month low in February in a worrying sign for GDP
growth prospects, while retail inflation rose to 3.18 per
cent, from a rise of 2.93 per cent in February, but remained within the
central bank’s comfort zone, creating room for more interest rate cuts. At the
same time, the IMF predicted that the
Indian economy will expand at 7.3 per cent this fiscal year, but to secure its
growth prospects, continuing with structural reforms is a must.
invite your opinions.