How is the situation with respect to bank credit? Is credit picking up or is it showing slower growth?

The RBI announces the banking credit and deposits data every fortnight for the 2-month ago period. In fact, for the fortnight ended 15-January 2021, the gross bank credit grew by 6.36% while the deposits grew by a more impressive 11.41%. This would ensure that the C/D ratio or the credit / deposit ratio continues to remain unfavourable.

If you consider the first 9 months period ending in Dec-20, then the bank credit had gone up by just about 3.2% even as the deposits had grown by a much more impressive 8.5%. It just goes to show that the credit demand is not keeping pace with the growth in deposits, which his leading to this lower C/D ratio in banks.

In the last 9 months, the non-food credit growth tapered from 7% to 5.9% as there was greater caution and also weaker demand from the industrial sector. In fact, the actual pressure came from loans to the manufacturing industry. The loans to industry contracted by 1.2% largely driven by weak capacity utilization in manufacturing.

However, the good news was the growth in the agricultural credit at an impressive level of 9.4%. In the 9-months period ending on Dec-20. Within the lending category, personal loans grew at a slower rate of 8.9% compared to 15% last year, largely on banks getting more cautious on unsecured loan categories. Transport operators and trade triggered the credit growth to private sector; essentially a services led demand.