A few days into the lockdown, on March 27, bank deposits stood at Rs 135.7 lakh crore. Two weeks later on April 10, the outstanding deposits rose to Rs 137.1 lakh crore. In another two fortnights, on May 8, deposits increased to Rs 138.5 lakh crore – an increase of Rs 2.8 lakh crore in the six weeks since March 27. Rs 102.5 lakh crore on May 8 – a decrease of Rs 1.2 lakh crore in six weeks.
Banks have grown outstanding deposits by over 2% in six weeks, while the entire FY20 (until March 27) bank deposits increased by only 7.9%. The figures indicate a major shift to bank deposits during the lockdown. Most of the money went to fixed deposits, with the outstanding amount rising to Rs 123.9 lakh crore on May 8 – an increase of Rs 4.4 lakh crore during March 27.
Current and savings deposits have fallen by Rs 1.6 lakh crore to Rs 14.6 lakh crore. While a fall in bank credit in April is not uncommon, but what highlights this year’s decline is that the year’s end occurs in March, leading to a withdrawal in April was missing. As a result, FY20 credit growth was only 6.1% – less than half the 13% growth in FY19.
Finance Nirmala Sitharaman, in its meeting with banks on Friday will take stock of Covid-related credit and the volume of pre-approved loans that have been sanctioned. FM has also called for details of the accepted loan offers and disbursements. The new schemes announced by the government under the Atma Nirbhar Bharat scheme will also be discussed.
Last week, SBI chairman Rajnish Kumar said that in the public sector in April 2020, public growth had seen a bank deposit of Rs 1.25 lakh crore, which attributed it to a flight to safety. I added that credit growth was negative in April, leading to excess liquidity in the banking system. The SBI chairman told TOI that top-rated companies were raising money from the money markets.
The outstanding amount under commercial papers jumped to Rs 4.17 lakh crore as on April 30, 2020, up from Rs 3.81 lakh crore as on April 15, with Rs 77,889 crore paper issued in fourteen days. The banks also say that small businesses are not taking advantage of additional limits as they have been waiting for the loans that will be subsidized because of the recently announced public credit guarantee.
“People’s savings are shifting to banks as it is safe and people are not ready to spend while trade, commerce and industry are retreating. The government must address the demand side by crediting cash to the affected sections of the community, ”said Maharashtra State Bank Staff Federation Secretary General Devidas Tuljapurkar.
I added that the government needs to empower banks by tackling issues such as recruitment as the heavy lifting in terms of credit to MSMEs, Mudra Shishu scheme, street vendors and Kisan credit cards has been shifted to banks. “In the process, the focus is shifting from business credit to retail credit where involvement of the entire workforce is needed,” he said.
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