Demonetisation has pushed the banks' credit growth to historic lows and the rate cuts by banks may may bring about a bounce back at least in the housing sector, a State Bank of India (SBI) report said on Thursday.
"The low credit growth is a matter of concern, as the fortnightly data of all scheduled commercial banks indicates that credit offtake year-on-year declined to a historical low of 5.1 per cent as on December 23," according to the SBI report titled 'Econwrap - Betting on credit growth'.
"During the period between November 11 and December 23, credit offtake has declined by Rs 5,229 crore, while banks' deposits grew by around Rs 4 lakh crore," the report stated.
With rate cuts now being 90 bps at one go, clearly the evidence is strong for a credit growth rebound at least in the housing sector, it added.
With rate cuts now being 90 bps at one go, unmistakably the proof is solid for a credit growth bounce back at least in the housing sector, it included.
The State Bank of India on January 1 had cut its loaning rates by 90 basis points for maturities ranging from overnight to three-year tenures.
As to issues of of normalisation after demonetisation, the report said that by January-end, the Reserve Bank of India (RBI) ought to have the capacity to replace 67 per cent of the demonetised currency and by February-end 80-89 per cent.
The aggregate amount of the spiked high value denomination notes of Rs 500 and Rs 1,000 available for use on November 8 was Rs 15.44 lakh crore, as indicated to the Finance Ministry figures.
The most recent data of RBI demonstrates that by December-end, 44 per cent of the demonetised currency has been replaced.
"If we assume that RBI continues to print as it is doing as of now, things will be closer to normal by February-end," the SBI report said.