Drop in bank loans for the 2nd time in 3 years

Latest Reserve Bank of India data showed that bank loans contracted for the second time in three years in April-August by nearly a percentage point or over INR 90,000-91030 crore as against a growth of INR 1.5 lakh crore in the same period last year. This has been attributed to tepid credit demand and prudence by banks after bankruptcy laws came into play to resolve bad loans.

Commenting on the update, Madan Sabnavis, chief economist at Care Ratings said “It is reflective of two things. One, companies are not borrowing much due to low investment. Second, banks are not keen to lend to industry and prefer retail, where there is an improvement. Overall, it reflects low growth tendencies.”