Surplus liquidity, coupled with the forward guidance by the Reserve Bank of India (RBI), has facilitated monetary transmission and there has been a comprehensive pass-via of policy price cuts to fresh rupee loans and term deposit prices of banks because March 2020, the central bank mentioned in its bulletin for September, released on Thursday.
The median term deposit price eased by 152 basis points (bps) via March 2020 to August 2021. A larger dip of 181 bps is discernible across shorter-tenor deposits of maturity of up to one year, the RBI mentioned in its month-to-month State of the Economy report. Since March 2020, the one-year median marginal price of funds-based lending price (MCLR) of banks has softened cumulatively by one hundred bps, the report mentioned.
At the identical time, as on September 10, currency in circulation grew at its slowest pace of 9.4% because November 2017, down from 22.4% a year ago. The trend mirrors subdued precautionary demand in contrast to the surge recorded a year ago for the duration of the 1st wave, the RBI observed.
The central bank took note of the sluggish credit development to the industrial sector because 2014-15, which has also led to a moderation in the general credit development. Based on a bank-sensible evaluation of information, the report mentioned a couple of banks are contributing drastically to general non-meals credit offtake. It split up banks into two categories — the dominant-group of banks, which incorporates six major lenders on the basis of their share in total non-meals credit and the other-group of banks, which incorporates the remaining 27 banks.
Credit to the industrial sector extended by the other-group registered a damaging compound annual development price (CAGR) of 1.6% involving FY15 and FY21, even though that by the dominant group registered a CAGR of 3.7% for the duration of the period. In the pandemic year, the credit extended by the dominant group to the industrial sector registered an accelerated development of 5.1%, although that delivered by the other-group contracted by more than 7%, the report mentioned.
“Thus, it is evident from the above that a few banks are driving credit growth to the industrial sector, whereas, most of the other banks are lagging behind in extending credit to the industrial sector,” the report mentioned.