Improving Monetary Transmission: Shoring up Bank Balance Sheets As explained earlier, even as the Reserve Bank has reduced its policy repo rate by 50 bps since October 2016 and by a cumulative 200 bps since December 2014, the banking sector’s credit growth has remained much muted.
While weak demand for bank credit could be one of the factors leading to the observed slowdown in credit growth, a primary cause of the slowdown had also been the weak balance sheets of public sector banks in view of large  13  non-performing assets which seem to have made banks risk averse and induced them to reduce the supply of credit: under-capitalized banks have capital only to survive, not to grow 7.