Credit growth may not revive in near future: SBI
The Dollar Business Bureau
India’s credit growth is unlikely to recover materially in near future because of the prevailing demand conditions which are acting like a laggard, said a report released by State Bank of India (SBI). This was revealed by the bank’s Composite Index which released for the month of May. The Composite Index by the bank mirrors the credit demand in the country and other data available for the public.
SBI Composite Index that tracks the country’s manufacturing sector have two growth constituents - month-on-month as well as year-on-year scaling from zero to 100. Index value of 42-46 represents moderate decline, 46-50 shows low decline, 50-52 means low growth, 52-55 says there is moderate growth and over 55 proves high growth.
The Monthly Index has improved to 50.3 in May 2016 from 46.5 in last month of this year. This is due to various factors that include rise in commercial vehicle and fast moving consumer durables. The growth is slightly observed in all sectors except the gems and jewellery sector.
Though it is too early to say anything about credit growth in the country there were some positive signs in the growth which increased at 11.3% till March 18 this year.
However, the credit growth again decreased to 9.2% on April 29, 2016. With this, SBI is skeptical about the credit growth to upsurge as the banks are also focused in cleaning their balance sheets. The estimated correlation between pickup in credit growth and cleaning the balance sheet would happen if there is a significant increase in the growth cycle.
According to SBI, growth needs to happen prior to the pickup in credit growth. On the other hand, SBI Composite Index has shown a decline at 51.6 in May 2016 when compared to 52.2 in the previous month of the same year. This is mainly because of the decline in credit growth.
SBI also maintains Index of Industrial Production (IIP) growth that remained flat in the months of April and May this year at roughly around 3%.