A Historic Low: Whats really happening with bank credit growth?

Key Highlights: 

• Bank credit growth to historic low
• Bank credit growth decelerated to Rs 1.5 lakh crore from April 2017 - till date
• MCLR rate even below 8% in Q1FY18

Reserve Bank of India's (RBI) repo rate cuts to revive investment in India has managed to bring down interest rates but bank credit growth continues to remain abysmally low. 

Latest data show that credit growth has decelerated by Rs 1.5 lakh crore between April 2017 till date -- a historic low. 

Shashin Upadhyay, analyst at ICICI Securities earlier said, "With relative improvement in the macro-economy, we estimate systemic loan growth rate to rise to 10% YoY in FY18."

He believed three things will aid the performance of loan growth in FY18. First, waning credit substitution as banks effectively price as per the MCLR curve; second, continued growth momentum in retail, aided by declining product rates and a modicum of revival in corporate credit on higher inflationary expectations and lastly, improved utilisation of industrial capacity.

This, however, has not happened. 

Between April 2017 – July 2017, all scheduled commercial banks (SCBs) business ( advances and deposits has seen decline in both year-to-date (YTD) and year-on-year (YoY) basis.

Slowdown in loan growth takes securitisation to all-time high of Rs 1 lakh crore