New Delhi: Credit growth in the country is unlikely to revive "materially" in near term as demand conditions are still acting as a laggard, says an SBI report.
The report noted that it is "too early and premature" to say about the credit growth picking up in the country.
In the fiscal 2015-16, the credit off-take showed some signs of improvement and was at 11.3 percent as on March 18 2016. However, as on April 29, this year, credit growth has again declined to 9.2 percent.
"Given that demand is still a laggard we are skeptical of credit growth picking up even as the banks are in the midst of balance sheet cleaning," SBI said in a research note.
According to the report, the supposed correlation between balance sheet cleaning and credit growth picking up will only happen once the growth cycle picks up significantly.
"In our view growth will now have to happen before credit growth."
Meanwhile, the yearly SBI Composite Index for May this year declined to 51.6, mainly due to lower credit growth.
The monthly index, however, jumped to 50.3 in May from 46.5 in April due to factors such as increase in commercial vehicle and consumer durables sales.
An index value of 42 to 46 means moderate decline, 46 to 50 (low decline), 50 to 52 (low growth), 52 to 55 (moderate growth) and above 55 (high growth), it added.
The SBI Composite Index rivals the existing data point from Nikkei. It has been developed on the basis of bank's internal loan portfolio, which mirrors the credit demand in the country and other data sets available in the public domain.