What slow credit growth says about economic recovery
The trend in credit and deposit growth rates
As per the Financial Stability Report of January 2021, year-on-year (y-o-y) credit growth of scheduled commercial banks was slowing down even before the pandemic. Credit growth rate in March 2020 was at 5.7%, which fell further to 5.0% by September 2020. On the other hand, deposit growth remained healthy at 10.3%, thanks to precautionary savings by people influenced by the virus-induced uncertainty. With signs of a probable V-shaped recovery, credit growth in the second quarter of FY21 did see an uptick at 6.2%; however, with the onslaught of the second wave, things might take another gloomy turn.
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