Page 208 - NHB AR 2020-21-3 complete- Print (1)
P. 208
on March 9, 2021. It has eased considerably since then and was trading range bound around
6 per cent.
1.2.1.5 Bank Deposit & Credit Growth
The COVID-19 disruption has hit almost all areas of the economy and the banking sector has
not remained immune. Deposits grew fast in the period when consumption got hit due to
restrictions and precautionary behaviour. However, credit growth remains muted because
of lower economic activity. The gap between non-food bank credit growth and aggregate
deposits growth widened.
The credit growth was very tepid in the first half (until September 2020), but it gathered
steam from October in tandem with the sharp economic recovery. Sector wise credit growth
shows that agriculture and allied segment registered a growth rate of 12.3 per cent (Y-o-Y) led
by strong monsoon, good harvest season and government measures. Under industry credit,
MSME grew by 6.7 per cent in FY21 as compared to 1.1 per cent in FY20 strongly supported
by disbursements under Emergency Credit Line Guarantee Scheme. Housing loan growth
stood at 9.1% in FY21 as compared to 15.4% in the same period of last year.
Going forward, FY22 had begun with an unexpected second wave of COVID-19 infections.
Although the containment strategy this time included avoiding a complete lockdown and
managing the situation through micro-containment zones, the impact on the economy was felt.
However, the prospects for credit growth in FY22 look promising with diminished corporate
stress, increased provisioning, and well-equipped capital adequacy levels across the banks.
Addition to this, roll-out of pre-package insolvency for resolution (an informal arrangement
through which the promoters of a stressed company propose a resolution plan to the creditors
before the company goes for bankruptcy proceedings), the resumption of courts, and the
formation of National Asset Reconstruction Company, Extension of Emergency Credit Line
Guarantee Scheme (ECLGS), till September 30, 2021, is expected to propel the credit off take
of the banking sector.
1.3 Measures taken by the Government & Regulator to combat the
COVID -19 Pandemic
The COVID-19 crisis elicited extensive and immediate policy responses from governments
around the world. These centered on preventive and palliative health measures, as well as
extensive macroeconomic policy responses in the form of fiscal and monetary support for
struggling businesses. Governments around the world responded to the COVID19 crisis
by aggressively deploying fiscal policy to boost health expenditure, income transfers and
increased welfare payments, as well as wage subsidies to firms to retain employees to minimize
short term unemployment. The fiscal stimulus and Monetary Measures are presented in the
Box 1 & Box 2
188 | Annual Report 2020-21
6 per cent.
1.2.1.5 Bank Deposit & Credit Growth
The COVID-19 disruption has hit almost all areas of the economy and the banking sector has
not remained immune. Deposits grew fast in the period when consumption got hit due to
restrictions and precautionary behaviour. However, credit growth remains muted because
of lower economic activity. The gap between non-food bank credit growth and aggregate
deposits growth widened.
The credit growth was very tepid in the first half (until September 2020), but it gathered
steam from October in tandem with the sharp economic recovery. Sector wise credit growth
shows that agriculture and allied segment registered a growth rate of 12.3 per cent (Y-o-Y) led
by strong monsoon, good harvest season and government measures. Under industry credit,
MSME grew by 6.7 per cent in FY21 as compared to 1.1 per cent in FY20 strongly supported
by disbursements under Emergency Credit Line Guarantee Scheme. Housing loan growth
stood at 9.1% in FY21 as compared to 15.4% in the same period of last year.
Going forward, FY22 had begun with an unexpected second wave of COVID-19 infections.
Although the containment strategy this time included avoiding a complete lockdown and
managing the situation through micro-containment zones, the impact on the economy was felt.
However, the prospects for credit growth in FY22 look promising with diminished corporate
stress, increased provisioning, and well-equipped capital adequacy levels across the banks.
Addition to this, roll-out of pre-package insolvency for resolution (an informal arrangement
through which the promoters of a stressed company propose a resolution plan to the creditors
before the company goes for bankruptcy proceedings), the resumption of courts, and the
formation of National Asset Reconstruction Company, Extension of Emergency Credit Line
Guarantee Scheme (ECLGS), till September 30, 2021, is expected to propel the credit off take
of the banking sector.
1.3 Measures taken by the Government & Regulator to combat the
COVID -19 Pandemic
The COVID-19 crisis elicited extensive and immediate policy responses from governments
around the world. These centered on preventive and palliative health measures, as well as
extensive macroeconomic policy responses in the form of fiscal and monetary support for
struggling businesses. Governments around the world responded to the COVID19 crisis
by aggressively deploying fiscal policy to boost health expenditure, income transfers and
increased welfare payments, as well as wage subsidies to firms to retain employees to minimize
short term unemployment. The fiscal stimulus and Monetary Measures are presented in the
Box 1 & Box 2
188 | Annual Report 2020-21
