The last quarter of the current financial year is proving to be very challenging for banks in the matter of credit growth. Relatively, demand for bank credit is lower this year in the traditionally busy quarter (fourth quarter) compared to the year-ago quarter.

Going by the Reserve Bank of India’s scheduled banks’ statement of position, banks disbursed loans amounting to ₹1,17,051 crore between January 6, 2017 and March 3, 2017, 33 per cent lower compared to the year-ago period.

Bankers say demonetisation has crimped demand in the economy, resulting in tepid credit appetite. This is despite banks cutting lending rates in the wake of huge deposit inflows during the demonetisation phase.

According to PTI, State Bank of India Chairman Arundhati Bhattacharya, who spoke at a CII event, observed that banks are facing twin challenges — growth capital and asset quality concerns.

“The asset quality concerns are due to lack of demand and loans given during the boom years and we don’t see both improving in the medium term. Therefore, the need for focusing on farm sector growth,” she said.

On overall credit growth, which averaged at a multi-decadal low of 5 per cent so far, the SBI chief said she does not see a revival in the near term.

Deposits during the reporting period fell ₹38,795 crore compared with a jump of ₹1,32,231 crore in the year-ago period. Bankers attribute the decline in deposits to the phased removal of cash withdrawal restrictions with effect from January 1, 2017.

With effect from March 13, 2017, all limits on cash withdrawals from savings bank accounts have been removed.

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