After the 2nd wave of the Covid-19 pandemic, India's economic recovery speed has severely slowed due to many reasons starting from high inflation to lack of demand and weak consumer sentiments. At the moment, many individuals and businesses are seeking loans to either reshape finances or stabilise operations.
Now among above all the mentioned obstacles, there seems to be present a major and bigger one. Banks now have tightened up the lending even as individuals and companies are yearnings for credits and more so have turned cautious after the 2nd Covid-19 wave.
Before the pandemic struck India lending rate was almost at 12% wherein now the pace has been slower to 5.5-6 %. According to the Reserve Bank of India (RBI), data loans have been dried up over the past few months.
The country’s biggest public lender, State Bank of India (SBI), had plans to double its credit growth to 10 per cent in FY22. However, the bank is now willing to miss the target, given the situation.
Not just SBI but many other banks big public and private have turned cautious seeing the defaults after the pandemic. This could severely slow down the economic recovery.
Even as there is high demand for bank credit at the moment, it is unlikely that banks will oblige.
However, banking sectors dealing with other long term problems a such number of frauds that occurred over the past few years and the ailing banking sector which has weakened after the pandemic struck.
The notable point would be due to tightness in lending banks could nullify a lot of government pandemic relief schemes that largely rely on higher lending by individuals and businesses.