RBI wary of contraction in credit to firms
Bank credit growth has, however, returned to the levels observed in the early months of the pandemic
MUMBAI : Contraction of credit to large industries and infrastructure remains a cause of concern, the Reserve Bank of India (RBI) said. However, credit growth to medium industries has accelerated, pointing to the positive impact of measures taken by the government and RBI, the bank said in its monthly bulletin.
“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.
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 has registered accelerated growth recently, 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 of 12 February, bank credit growth stood at 6.6% compared to 6.4% last year and 5.9% 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 a 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 to 8.4% in January, after having risen to 9.5% in October 2020, even as services sector credit growth continued to slow.
Aviation services saw a 120% jump in credit growth to ₹12,280 crore at the end of January 2021 compared with 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 saw growth slowing to 9.1%, the lowest in the last 10 years after staging a recovery to 10% in November. Within this segment, home loans saw sluggish growth of 7.7%, the lowest in the last 10 years and credit card debt saw a 5% growth. Vehicle loan growth slowed slightly, reaching 7.1%. Gold loans continued its growth momentum touching 132%.
Agricultural credit growth accelerated further to 9.9%, 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 saw negative 2.6% growth. 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).
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