Mumbai: Amidst a slowdown in the economy bank credit is expected to grow at 6.5-7.0% during the current fiscal ending March’20, according to ratings firm Icra . This will be the lowest growth in 58 years.The year-on-year (y-o-y) growth in bank credit is expected to decelerate sharply to 6.5-7.0% during FY’2020 from 13.3% during FY2019 on account of limited incremental credit growth during the financial year so far, Icra said in a report.Incremental bank credit has increased by only Rs 80,000 crore during FY’20 till December 6, 2019 to Rs 98.1 lakh crore, compared to an increase of Rs 5.4 lakh crore and Rs 1.7 lakh crore during previous corresponding periods of FY’19 and FY’18 respectively, Icra said.Assuming a scenario of higher credit demand in the second half of FY’20 fresh loans extended by commercial banks could be Rs 6.7- Rs 7 lakh crore, Icra projects a 40-45% y-o-y decline in incremental net bank credit to Rs. 6.3-6.8 lakh crore during FY’20 from Rs. 11.9 lakh crore in FY’19. This will translate to a growth of 6.5-7.0% during FY’20, Icra said.A shift of large borrowers such as non-banking financial companies (NBFCs) and housing finance companies (HFCs) to the banking system for their funding requirements, had boosted bank credit growth in FY’19. However, factors such as muted economic growth, lower working capital requirements, as well as risk aversion among lenders, have compressed the incremental credit growth in FY’20, Icra said.On the positive side, the incremental deposit accretion of the Indian banking system at Rs 5.3 lakh crore remained higher than credit growth till December 6, 2019.The overall deposit base increased to Rs. 131.1 lakh crore as on December 6, 2019, a y-o-y growth of 10.3% and credit to deposit ratio of 75.8 per cent. Apart from the muted increase in currency in circulation, the build-up in the deposit base of the banks could be attributed to factors such as lower increase in asset under management (AUM) of debt mutual funds as well as higher liquidity maintained by various corporate entities. Overall Icra expects y-o-y deposit growth to remain higher than credit growth at 8.4-9.0% for FY’20.