Bank credit shrinks 0.8% in April

Commercial bank credit in India contracted 0.8 per cent (~89,087 crore) in April, reflecting a lean period at the start of the new financial year (FY22) and the adverse effect of the second wave of Covid-19. The outstanding credit as of April 23, 2021, was ~108.60 trillion, according to the Reserve Bank of India data.

In April FY21, credit had shrunk 0.9 per cent.

In absolute terms, bank credit usually declines in the first month of the new financial year, as it is a lean period, CARE Rating said in a statement. This trend has been observed for the last five years.

The year-on-year (YOY) growth in loans has also shown moderation amid the rising cases of coronavirus. Bank credit expanded 5.7 per cent in the 12 months till April 23, against 6.8 per cent a year ago.

Bankers said it is too early to estimate the pace of credit in months ahead. What is certain is that the health crisis and related lockdowns will hit consumption and credit demand. However, the RBI’S regulatory package with focus on individuals and small businesses may help support the system.

The deposit accretion activity was low in April. The aggregate deposits of banks rose by just ~20,798 crore over March. In April 2020, deposits had grown by ~1.55 trillion. The outstanding deposits stood at ~151.34 trillion as of April 23, 2021.

The YOY growth in deposit was higher at 10.3 per cent (till April 23, 2021) against 9.9 per cent a year ago.