Chart: Bank Credit Growth at Lowest In 20 Years

As of November 11, Credit growth in India has fallen to the lowest level in over 20 years. And this is before the demonetization hit (which came on Nov 8, so it wouldn’t have reflected in this data).
We will get updated data only after two weeks, but this data is bad enough.
Much of this is due to lower borrowing from banks by corporates and direct access to the bond markets, perhaps. Bond markets have way lower interest rates than bank minimums, which are very high right now because they simply refuse to cut rates.
With the massive increase in deposits now, it makes even more sense for banks to lend as much as they can. Yet, they don’t cut rates, and prefer to park humongous amounts of money with the RBI. Because if they did cut rates, then all existing borrowers too would get lower rates and that would hurt profits. But how long will India have to live with such silly logic?
This is a complete breakdown of interest rate transmission, on the downside. This simply means that no matter what happens, no matter how bad credit growth is, banks just do not want to lend, otherwise they would be cutting down their lending rates now. Banking is really broken.