Indian bank loan growth slows to lowest since 2022 amid economic uncertainties

WEB DESK: The Indian economy remains resilient to tackle global uncertainties due to its strong domestic fundamentals, the country’s central bank said in a report.

Despite persistent trade frictions, the outlook for India is one of “cautious optimism,” the Reserve Bank of India said in its State of the Economy report released Wednesday. The country “stands well-positioned to navigate the ongoing global headwinds,” it added.

While India’s central bank expects the economy to expand at 6.5 percent for the current fiscal year that started April 1, banks like Morgan Stanley and Goldman Sachs Group have pruned the growth forecast to 6.1 percent, citing trade related disruptions, reported Bloomberg.

Strong domestic consumption, increased government spending and strong services sector are helping the economy, the central bank said. Easing inflation and good rainfall will also bolster economic prospects, it added.

IMF rejects India’s claims of misused funds, says Pakistan loan strictly for reserves

A “bumper” winter crop and the forecast of an above-normal monsoon are expected to further boost rural consumption and help keep food inflation in check, the RBI said.

Banks’ loan growth at the slowest pace since 2022

Inadian’s loan growth has hit a snag, slipping below 10 percent for the first time in over three years. With a uncertain economic outlook and cheaper bond options, companies are holding back on borrowing. Bank loans grew just 9.95 percent to 182.9 trillion rupees ($2.1 trillion) as of May2, marking the slowest pace since March 2022.

Recovery in volumes may be gradual

Turnover in local equity markets has remained below peak levels for some time, despite recent signs of recovery. While net flows into equity mutual funds have been positive for over four years, they have weakened in recent months and are now mainly supported by monthly recurring investment plans.

The derivatives space continues to await regulatory clarity on several issues, including expiry schedules and entity-level gross limits on index options. Analysts at Motilal Oswal expect industry-led initiatives aimed at raising awareness and improving financial literacy will help foster a long-term investment mind-set.