Muted credit growth becoming a risk: RBI

Industrial credit growth dipped to negative in Oct 2016 and only moved to nil growth in August year, according to RBI data

The Reserve Bank of India’s (RBI’s) Financial Stability Report for December has stated that risks to growth are emanating from the “on-going deleveraging” phenomenon in the heavily indebted parts of the corporate sector, as well as from muted credit growth in public sector banks (PSBs). 

The report cites that thin capital buffers of PSBs causes lower investment activity in the economy, as some major sectors have witnessed a decline in credit growth over the past two years. Industrial credit growth dipped to negative in October 2016 and only moved to nil growth in August year, according to the RBI data.