Bank lending and deposits show an economy in very weak shape

Growth of lending and deposits at record lows in the last twenty years

RBI Watch                                                                                    Monetary Policy 2015-16

The graph below charts the growth of bank deposits and credit on a financial year basis from 1991, the year economic reforms were initiated in India.

During this period, the growth of bank credit peaked in 2004-05 at 31%. Two years later, in 2006-07, deposits also saw their peak at 24%.

Both the growth of credit and deposits has pretty consistently declined since. At the end of the last financial year, 2014-15, credit growth fell to 9% and deposit growth to 11%.

In fact, the deposit growth in 2014-15 of 11% is the weakest since 1990-91, and this is also the case with credit growth, barring 1991-92!

Are there signs of a change during the current financial year, 2015-16? The table below shows the numbers till August 21, 2015 – the last date up to which RBI data is available.

The picture is not encouraging, although better than the same period last year: credit has grown by just 2% and deposits by a modest 5%, when a month short of half of the financial year is behind us.