The fall comes amid weakening economic trends, which can lead to subdued credit growth and elevate stress formation in the immediate term.
Bank credit growth declined to 8.5 per cent in January from 13.5 per cent in the year-ago period led by a sharp slowdown in loans to the services sector, according to RBI data. Growth in advances to the services sector decelerated to 8.9 per cent from 23.9 per cent in January 2019.
“Bank credit growth has been falling, exhibiting a declining trend with PSU banks apparently not doing much of credit intermediation- to the extent of invoking FM admonition. Growth heavy lifting is largely done by select private banks. On the positive side, systemic asset quality trend seem to be improving with the Insolvency and Bankruptcy Code (IBC) process helping in recoveries,” analysts at HDFC Securities said in a note.
The credit growth will likely see an uptick aided by a low base, policy pushes, and better macros. The private banks will continue to gain market share, it added.
According to Business Standard report, in a meeting between the chiefs of PSBs and the Reserve Bank of India (RBI) officials, the RBI highlighted the muted credit growth in the economy and asked them to take steps to increase credit growth. CLICK HERE TO READ FULL REPORT