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Credit growth indicates early signs of decline as covid hits sentiment, bankers

Bank credit is showing early signs of a slowdown following the onset of the second wave of covid infections, with 5.3% year-on-year growth in the fortnight ended 9 April, compared to 5.6% in the previous fortnight.

To be sure, while in absolute terms, bank credit usually declines in the first month of a new financial year, as it is a lean period, according to Care ratings, the y-o-y growth rate has fallen in the first month of a new fiscal year for the first time in the last five years, reflecting subdued credit demand amid the rising second wave of the pandemic.

“Bank credit growth stood at 5.3% and 5.6% on y-o-y basis during the last two fortnights as compared with last year’s level of 7.2% and 6.1%. The risk aversion from both lenders and borrowers failed to report a pick-up in bank credit growth, despite a low base of the previous year which was the initial period of lockdowns,” said Care Rating in its report.

Even deposit growth fell to 10.9% in the fortnight ended 9 April, compared with 11.4% in the previous fortnight.

Bankers said business is not a priority for bank managements, as they are fighting to save the lives of employees. For instance, 9,000 State Bank of India (SBI) employees were covid-positive.

“Work has come to a bare minimum. Number of covid cases has exploded. In February we had come down to 200-300 positive cases. Currently, it’s close to 9,000 active covid cases. There are far fewer people in administrator offices,” said an SBI executive, on the condition of anonymity.

A chief executive of another public sector bank said: “The situation is very bad in Delhi and Lucknow. The virus is spreading fast and the government should consider bank employees as frontline workers and look at vaccinating them as soon as possible.”

Struggling with the unabated rise in covid-19 infections among employees, banks have already restricted working hours between 10am and 2pm. The lenders are providing only essential services, including deposits, withdrawals, remittance and government business at branches.

The Indian Banks’ Association (IBA) has also suggested that 50% of the staff attend office on a rotational basis. While the IBA has issued an advisory, they are yet to be implemented by the state banking committees, leading to challenges for employees.

“Even though the IBA has sent advisory, many state level bankers’ committees are yet to implement the rules. Without the permission of the state government, SLBC cannot implement them. Different guidelines are being issued by different states. To assure safety of employees, Aadhaar centres must be suspended,” said C.H. Venkatachalam, general secretary, All India Bank Employees’ Association.

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