Green shoots in bank credit growth?

Graphic: Subrata Jana/Mint

Bank credit growth seems to be finally picking up. As on 11 December, growth in bank credit from a year ago was 11%, well above the average rate of growth this fiscal year. The chart shows the sudden jump in credit.

Of course, a fortnight’s data does not a trend make and the sudden spurt may well be a one-off affair. But growth in bank credit is usually a harbinger of economic growth. It remains to be seen though whether this green shoot thrives or withers away.

Although State Bank of India (SBI) chief economist Soumya Kanti Ghosh says it’s too early to say whether the higher growth is a secular trend, he says there has been an improvement in credit growth.

The bank’s economic newsletter for December, State Bank Ecowrap, says: “Interestingly, the incremental credit growth numbers indicate that in the last two months (October and November) after the Reserve Bank of India (RBI) cut repo rates, there is evidence of a rapid pick-up in incremental credit growth, after adjusting for refinancing. Clearly, deep rate cuts do work in India.”

We’ll also have to see whether the spurt in credit growth is due to an increase in lending to firms or for personal finance. If it’s the latter, it may not be an indication of any improvement in the economy.

[“source -livemint”]

Related Posts