- Wealth PMS
RBI provides the latest credit release. Scheduled bank credit is now at Rs. 30.89 lakh cr. (trillion) which is a gain of 38,000 cr. over two weeks back. This is a credit rise of 15.79% from the same time last year, taking the average growth in Feb 2010 to 15.5%.
(Click the images for larger graphs)
To put things in perpective, we are still lower than May 2009, all the way up to 2007 and probably earlier as well.
Credit growth is great for banks and in general the economy, but helps promote inflation. Typically credit will grow at 2-3x the GDP growth rate if the assets thus bought are put to productive use. If credit is given to bubble assets – like real estate has been, or sometimes stocks – it tends to create default risk as well.
Unfortunately we don’t yet have a handle on how much loans are given to which sectors, but 16% is not “over-heated” growth, just a move back to the good old times.