Bank credit up just 1.76% in March-Sept: RBI

Despite the boom in financial markets, the economy as a whole is yet to see a turnaround. This is borne out by the RBI’s latest credit deployment data, which show that growth in bank credit to almost all sectors has slowed.

In the six months between March 21 and September 19 this year — the bulk of which period also coincides with the term of the new government in office — gross credit of the banking system grew by a tepid 1.76 per cent (or by ₹99,700 crore versus ₹3,32,700 crore in the year-ago period).

Lack of credit demand from corporates and banks’ reluctance to lend to the sector in the face of rising non-performing loans dragged down the overall credit growth.

“We have not witnessed any up-tick in credit demand as corporates are still de-leveraging. It will take about a year or so for the government’s measures to impact the banking and financial sector,” said Bank of India Chairperson and Managing Director Vijayalakshmi Iyer.

In the same period, bank credit to industry decreased a tad. Industry constitutes about 43 per cent of the total bank credit. Within industry, medium and large enterprises contributed to the fall.

“Deceleration in credit growth to industry was observed in major sub-sectors, barring construction, glass and glassware, beverages and tobacco, and mining and quarrying,” the RBI said.

At the same time, priority sector loans by banks rose 1.4 per cent as banks lent more during the period to agriculture and allied activities and low-cost housing, the RBI data showed.

Agriculture and allied activities got ₹55,400 crore of bank credit till September 19, 2014, compared with ₹20,100 in the year-ago period. Despite this, much of the agricultural sector remains outside the formal banking channel.

According to the RBI data, in the first six months of the current financial year, non-food bank credit grew only by ₹85,500 crore compared with ₹3,32,400 crore in the year-ago period. This segment comprises bank loans to the industry, services sector, personal loans and priority sector loans.