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MUMBAI (Reuters) - Indian bank credit growth hit a record low in fiscal 2020-21 and is expected to languish near those levels this year as a massive surge of COVID-19 infections risks denting India s economic recovery and forces lenders to turn cautious again.
Credit growth touched a record low of 5.6% in financial year 2021, recently released Reserve Bank of India (RBI) data showed, and it slipped even further in April. We were estimating credit growth of 8-9% for this financial year, but due to the rise in COVID-19 cases, a higher mortality rate and lockdowns in several parts of the country, downward risks have arisen, said Karthik Srinivasan, analyst at ICRA.
The Chennai-based public sector lender is expected to benefit from faster-than-expected economic recovery in India. Rating agency removed the ratings from CreditWatch, where they were placed with negative implications on June 26, 2020. Another public sector lender Allahabad Bank was merged with Indian Bank on April 01, 2020. Outlook on financial instrument is negative due to asset quality and capital risks. It reflects the view that the bank s capital and asset quality could deteriorate due to the Covid-19 fallout over the next 12-18 months. Chennai-based bank s risk-adjusted capital (RAC) ratio could fall below five per cent on a sustained basis in the absence of external capital infusion, rating agency said. Its capital adequacy ratio stood at 13.64 per cent in September 2020.