BIS: India’s bank credit-to-GDP ratio grows 56% in 2020
As per the latest data from Bank for International Settlements (BIS), incremental credit growth has decreased to 59-year low at 5.56% in Financial Year 2021.
- As per data, bank credit-to-GDP ratio has increased to a five-year high at about 56% in 2020.
- However, this increase is way behind its peers and is half of the G20 average.
- Total outstanding bank credit was at $1.52 trillion in 2020 at the credit-to-GDP ratio of 56%. However, this was the second lowest among all other Asian countries.
- In case of emerging market peers’ credit-to-GDP ratio is 135.5% while it is at 88.7% in advanced economies.
- Massive credit-driven stimulus which government pushed to help tide over impact of covid-19 pandemic in 2020, incremental credit growth increased by only 5.56%. It was the lowest recorded growth. In 1962, the growth rate was at 5.38%.
Bank Credit Growth
As per analysts, bank credit growth is the key indicator of economic growth. Credit-GDP ratio of 100% is the ideal, indicating robust demand for credit without fear of bubble in making. High credit-to-GDP ratio indicates aggressive & active participation of banking sector in real economy. Lower credit-to-GDP ratio indicates the need for more formal credit.
Credit-GDP ratio for other four BRICS members is as follows- Brazil-50.8%, Russia-88.12%, China-161.75% and South Africa-40.1%.
Month: Current Affairs - June, 2021
Category: Economy & Banking Current Affairs
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