Aggregate bank credit growth remained anemic in 2020-21; Increased Credit Flows in Retail, Services and Industry Segment in S1FY22

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In the latest report on banking industry trend and progress for 2020-21 and 2021-21 so far by RBI, gross bank lending has shown signs of recovery. Credit growth stood at 6.8% in September 2021, compared to 5.4% in fiscal year 2020-2021 and 6% in fiscal year 2019-20. However, growth remained at a single digit level.

In terms of value, gross bank credit stood at Rs 107.52 lakh cr in September 2021, compared to almost Rs 106.41 cr lakh at the end of fiscal year 21 and over Rs 100.98 cr at the end of the year 20.

In its report, the RBI said that “aggregate credit growth remained anemic in 2020-21, although some positive points emerged at the sector level: agricultural credit picked up after a sharp deceleration in the previous year; PVBs increased their lending to the service sector; and PSBs cushioned the deceleration in total retail credit growth, albeit in part. On the other hand, growth in service credit by PSBs and retail credit by PVBs has slowed against a background of rising NPA ratios. “

In terms of sector performance, the growth of bank credit to agriculture and related activities stood at 10.7% in September 2021, compared to 11.7% in 2020-2021. The growth of the industrial sector improved to 3.3% in September 2021 from 0.03% in 2020-21.

Credit growth in the services and personal loans segment improved significantly to 1.3% and 14% in September 2021, compared to (-) 0.3% and 12.3% in 2020-2021.

The RBI pointed out that an “analysis of the data reveals that although credit to large industries has contracted, their midsize counterparts have received significantly higher credit flows, encouraged by the system of guaranteeing lines of credit. The higher NPAs of large industrial borrowers at the end of March 2021 compared to better asset quality of midsize companies may also be a determining factor. “

“Within services, trade credit growth exceeded its prepandemic growth rate in 2020-21. Remarkably, its share in service sector credit also increased sharply in 2020-21,” RBI added.

RBI further stated that “during 2020-2021, banks’ personal loan portfolios exceeded their lending to the service sector, aided by a double-digit acceleration in home loans – the largest component of personal loans. Auto loans have gained ground, reflecting consumer interest after companies announced substantial discounts on automobiles. “


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