Overall bank credit growth continued to moderate for the fortnight ended September 11, 2020 at 5.3 per cent. The growth has been slowing for the past four fortnights from 5.8 per cent to 5.5 per cent as of August 28. This is approximately half the last year's progress -- 10.4 per cent as of September 13, 2019 and 10.2 per cent as of August 30, 2019 -- reflecting weak demand and risk aversion in the banking system due to the pandemic.
"Scheduled commercial banks are being very selective with their credit portfolios due to asset quality concerns and the overall bank credit is expected to remain slower in the near term," said a CARE Ratings report.
On the other hand, demand and time deposits increased by 12 per cent, as of September 11, 2020 compared with a 10.9 per cent rise in the previous fortnight. A 10 per cent growth was registered in the year ago period. Unlike credit, deposit growth was faster for fortnight ended September 11, 2020 compared to last two years, where it grew between 8-11 per cent.
"It indicates that the depositors are spending less and saving funds in bank deposits. The banking system liquidity is expected to remain in a surplus position aided by sustained growth in bank deposits as against slower growth in the bank credit growth. However, the liquidity surplus will continue to be weighed down by upcoming government borrowings," the report added.
Time deposits which account for 89.4 per cent of aggregate deposits grew at 11.6 per cent, year-on-year, during the fortnight while demand deposits which account for the balance 10.6 per cent saw an increase of 15.6 per cent.
Moreover, the credit-to-deposit ratio stood at the similar level, at 72.6 per cent, for the last two fortnights.