These are uncertain times and taking a loan with uncertainty looming over your head is not a wise decision. There is no surprise that the masses who are facing the brunt of this uncertainty have therefore not resorted to getting themselves loans, even after a massive liquidity injection by the central government.
India’s outstanding bank loans shrank during the lockdown which stands indicative of the fact that the demands for loans are falling as it is obvious aftermath of the uncertainty that comes with the pandemic.
A total outstanding of non-food credit in India shrank by ₹1.36 lakh crore, or by 1.32% to ₹101.83 lakh crore on May 8th from March 27th, 2020. These numbers come from the Reserve Bank of India (RBI).
The country has been under a strict lockdown since March 25th which was a procedure undertaken to flatten the upward curve of coronavirus cases in India. This lockdown effectively brought the economy to a complete standstill.
The reliable rating agency Icra stated on May 5th that the incremental credit flow from banks stood at ₹5.9 lakh crore in the Fiscal Year 2020, compared with the ₹11.9 lakh crore during the previous fiscal year. This is primarily because of slowing economic growth which has stopped the demand for credit and banks are now avoiding risks as frequently as possible.
The pandemic effect on the economy is something the Indian economy failed to estimate leaving it in a precarious situation at the moment. It is to be seen how the financial sector, along with the government will tackle this issue, and get the slumping economy back on track, and when.