Real Estate Loan Flow Lower Than Last Year

Even after the Reserve Bank has slashed the key interest rates by 135 basis points (bps) since February this year, the real lending rates have only gone up by 44 bps in spite of nominal lending rates falling by 105 bps during the same period. Loan flow is a whopping 106 per cent lower than last year, since the first lockdown was lifted in Mid-May" and both low credit demand and high real lending rates are constraining the recovery. According to the house economists at BofA Securities India, this high lending rate is the main reason for the steeply falling credit flows, which conversely also point to a deeper GDP contraction, accentuated by the pandemic. The latest RBI data shows bank loan growth has slowed to 5.9 per cent on July 17 from 7 per cent in February and 12.2 per cent last year. The numbers are starker if looked at credit flows between mid-July and mid-March (covering the lockdown), end-March, end-April (post-lockdown 1.0) and end-May (post unlock 1.0).