MUMBAI : Contraction in credit to large industries and infrastructure remains a cause of concern, the Reserve Bank of India said in its monthly bulletin on Monday. However, credit growth to medium industries has accelerated, pointing to the positive impact of several measures taken by the Government and RBI, the bulletin noted.
“The muted credit offtake in the recent past needs to be seen in the context of economic slowdown coupled with the COVID-19- induced lockdown," it said.
Also Read | Assam shakes up the micro loans universe
Bank credit growth, which had already started decelerating in 2019-20, experienced a further setback in 2020-21 in the wake of the pandemic. However, with the gradual resumption of economic activity, credit to agriculture and services sectors has registered accelerated growth in the recent period, the bulletin said.
According to the latest data, bank credit growth has returned to the levels observed in the early months of the pandemic. As on 12 February 2021 bank credit growth stood at 6.6% year-on -year compared to 6.4% during the same period last year and 5.9% as on 29 January 2021.
However, RBI’s sectoral deployment of credit data for the month of January showed that non-food bank credit growth slowed to 5.7% led by slowdown in industrial and personal loans. This is compared to the non-food credit growth of 8.5% seen in January 2020 and 5.9% in December 2020.
Credit to aviation and non-banking finance companies saw a sudden spike in January, even as services sector credit growth continued to slow, reaching 8.4% year-on-year in January 2021, after having risen to 9.5% in October 2020. Within services, aviation sector saw 120% jump in credit growth to ₹12,280 crore at the end of January 2021 compared to a 60% de-growth last year. Similarly loans to NBFCs like Power Finance Corporation, Rural Electrification Corporation saw a 151% growth to ₹71,109 crore during the same period.
Personal loans segment saw growth slowing to 9.1% year-on-year, the lowest in the last 10 years after staging a recovery in growth to 10% year on year in November. Within this segment, home loans saw sluggish growth of 7.7% year on year, the lowest in the last 10 years and credit card debt saw a 5% growth. Vehicle loan growth slowed slightly, reaching 7.1% year on year. Gold loans continued its growth momentum touching 132% year on year.
Agricultural credit growth accelerated further to 9.9% year on year, boosted by back-to-back surplus monsoon seasons.
Industrial credit witnessed persistent de-growth at -1.3% in January. This trend was led by large industrial credit, which constitutes 82% of industrial credit and de-grew 2.6% year on year. However, this segment registered a 50bps month-on-month growth. Micro and small industries saw negligible growth at 90bps year on year while growth in credit to medium industries continued to surge, reaching 19.1% year-on-year. Growth in credit to medium industries was aided by disbursals under the Emergency Credit Linked Guarantee Scheme (ECLGS).
According to rating agency CRISIL, bank credit is expected to grow 400-500 basis points (bps) higher at 9-10% next fiscal as the Indian economy recovers, supported by budgetary stimulants and measures announced by the RBI. Credit growth for the current fiscal is expected at 4-5% year on year
Click here to read the Mint ePaperMint is now on Telegram. Join Mint channel in your Telegram and stay updated with the latest business news.