India's Credit Growth Slowdown: A Puzzling Economic Trend Explained

सही उत्तर: B

Statement 1 is incorrect. The article states GDP is projected at 7.3% for FY24, while credit growth decelerated from 16.3% to 14.8%. Even at its decelerated rate, credit growth (14.8%) is higher than the projected GDP growth (7.3%). Statement 2 is correct. The article explicitly states that the deceleration is 'primarily driven by a significant drop in credit to the services sector, which saw growth fall from 20.6% to 13.9%'. Statement 3 is correct. High policy interest rates (like the repo rate) increase the cost of borrowing for commercial banks, which in turn leads to higher lending rates for businesses and consumers. This increased cost of borrowing dampens credit demand, as projects become less profitable and consumer loans more expensive.

सही उत्तर: C

Statement 1 is correct. Internal accruals are indeed funds generated internally by a company, mainly from its profits that are retained rather than distributed as dividends, and are often used for reinvestment or expansion. Statement 2 is incorrect. External Commercial Borrowings (ECBs) are loans raised by Indian entities from recognized non-resident entities, but they are denominated in foreign currency, not Indian Rupees. Borrowings in INR from non-resident entities are typically through instruments like Masala Bonds or Foreign Portfolio Investment (FPI) in debt, which are distinct from ECBs. Statement 3 is correct. If companies have sufficient internal funds (e.g., due to higher profits or conservative dividend policies), they might prefer to use these cheaper, readily available funds for expansion rather than incurring debt from banks, thus reducing their demand for bank credit.

सही उत्तर: B

Statement 1 is incorrect. While robust GDP growth generally correlates with higher credit demand, it is not 'invariable' or 'proportional.' Factors like corporate profitability (leading to internal accruals), availability of alternative financing (ECBs, capital markets), prevailing interest rates, and risk aversion by banks can decouple this relationship, as observed in the current scenario. Statement 2 is correct. The credit-deposit ratio (C-D ratio) is a key banking metric that measures the amount of loans a bank has extended relative to its total deposits. A higher ratio indicates more aggressive lending or higher credit demand relative to deposit base. Statement 3 is correct. The services sector is diverse, encompassing IT, finance, trade, hospitality, etc. Reduced credit flow to this sector could imply either lower demand for services from consumers (a shift in consumption patterns) or reduced capital expenditure by service providers (a slowdown in investment in service-oriented businesses), both of which would reduce the need for credit.