Non-food credit growth of the banking system slowed to 11 per cent, year-on-year, in November 2014 as compared with an increase of 14.7 per cent in November 2013, according to the Reserve Bank of India.
The slowdown in non-food credit growth, comprising loans to agriculture, industry, services, personal loans and priority sector, was mainly due to lacklustre demand from industry, services and non-banking finance companies.
According to RBI data on sectoral credit deployment, in the case of industry, credit off-take grew at a slower clip (7.3 per cent in November 2014 as compared with an increase of 13.7 per cent in November 2013) on y-o-y basis.
Deceleration in credit growth to industry was observed in all major sub-sectors, barring construction, beverages & tobacco, and mining & quarrying.
Credit to the services sector increased by 9.9 per cent in November 2014 as compared with an increase of 18.1 per cent in November 2013, with deceleration observed in all major sub-sectors.
Credit to NBFCs increased by 6.2 per cent in November 2014 against 15.9 per cent in the year-ago period.
Credit to agriculture and allied activities rose 20.2 per cent, up from 11 per cent in November 2013. Personal loans increased by 15.4 per cent (15.2 per cent in the year-ago period).
In its Financial Stability Report, the RBI said low credit growth reflects a combination of factors such as reliance on alternative sources of funding, balance-sheet repair and slack in demand as also an element of risk aversion.
However, pickup in credit assumes importance in the present context given that credit cycles have been leading business cycles in the post-reform period, the RBI said, adding that banks, therefore, need to prepare themselves to meet credit demand as investment picks up.