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The Covid-19 pandemic took a toll on credit growth of all scheduled banks in FY21. These banks reported slower 5.54 per cent year-on-year (yoy) growth against 6.55 per cent growth in FY20, as per Reserve Bank of India’s (RBI) latest Scheduled Banks’ Statement of Position in India.
The banks, however, saw copious deposit inflows despite interest rate cuts. Deposit growth of the aforementioned banks jumped 11.19 per cent yoy in FY21 against 8.32 per cent yoy in FY20.
With muted credit offtake, strong deposit growth and increased government market borrowings, banks augmented their Statutory Liquidity Ratio investments (in Government Securities/ G-Secs and State Development Loans/ SDLs), according to RBI’s latest monetary policy report (MPR). Banks’ investments in G-Secs and SDLs rose 19.24 per cent yoy in FY21 against 11.04 per cent in FY20, as per Scheduled Banks’ Statement of Position in India. The MPR said excess SLR holdings increased to 11.4 per cent of net demand and time liabilities (NDTL) on February 26, 2021 from 8.2 per cent at end-March 2020.
As per the Median Projections of Professional Forecasters in MPR, credit growth of scheduled commercial banks is expected to grow at 8 per cent in FY22 on the back of projected real GDP growth of 11 per cent
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