Slow credit growth continues to ail banks

Facing the challenge of slowing credit growth in the aftermath of the outbreak of Covid-19 pandemic, the banking sector witnessed an overall decline of 0.7 per cent in November 2020. On the other hand, deposits in banks have grown during the period reflecting the trust shown in the banking sector by depositors. However, it is putting the banks in an uncomfortable situation as it has become difficult for them to earn profits owing to depressed demand from borrowers.

Credit to industry contracted mainly due to contraction in credit to large industries by 1.8 per cent in November 2020 – from 3.0 per cent growth a year ago. Nonetheless, credit to medium industries registered a robust growth of 20.9 per cent in November 2020 as compared to a contraction of 2.4 per cent a year ago.