Private banks slowed credit

The private sector banks and foreign banks are primarily responsible for the fall in credit growth.

According to the RBI, a group-wise analysis of credit growth shows that credit from the private banks slowed down sharply while the foreign banks actually contracted.

That’s why despite ample liquidity in the system, non-food bank credit slowed down. Non-food credit by scheduled commercial banks decelerated significantly with the year-on-year growth falling to 11.2 per cent this year till October 9, from 29.4 per cent a year ago.

Groupwise, while the public sector grew 32.7 per cent y-o-y till October 10, 2008-09, it grew just 15.3 per cent in 2009-10 till October 9. In the case of foreign banks it was a negative 15.9 per cent in 2009-10 against 32.9 per cent in 2008-09. While the private sector banks saw credit growth rate at just 2.5 per cent this year against 19.7 per cent last year.

The retrenchment of credit was more pronounced in the case of the retail sector, according to the RBI. This is one of the reasons why the banks have been flushed with funds.

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