The deployment of gross bank credit improves a little but remains unbalanced

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The deployment of gross bank credit improves a little but remains unbalanced

Medium-sized industries experiencing robust and significant growth previously zero

By Dr Gyan Pathak

Gross bank credit in India has only improved slightly compared to last year. The latest data released by the Reserve Bank of India (RBI) shows that the deployment of food and non-food credits only increased by 7% between November 2020 and November 2021, down from 5.8% a year earlier. Food credit was -2.6 percent and deteriorated to -7.4 percent. However, non-food bank credit growth improved to 7.1 percent from 5.9 percent.

Credit to agriculture and related activities remained strong, at 10.4% in November 2021, up from 7.0% in November 2020. However, growth in credit to industry increased by 3.8% in November 2021 compared to 0.7% in November 2020.

For industries, in terms of size, credit to medium-sized industries saw robust growth of 48.7% in November 2021, up from 25.7% last year. Credit to micro and small industries accelerated to 12.7% in November 2021, down from 0.6% a year ago. However, credit to large industries in November 2021 remained broadly at the same level as last year, which was -0.4%.

Within industry, the growth of credit to “all engineering”, “beverages and tobacco”, “chemicals and chemicals”, “infrastructure”, “mining and quarrying”, “plastic rubber and their products” and “textiles” accelerated in November 2021 compared to the corresponding month of the previous year.

However, the growth of credit to “base metals and metal products”, “cement and cement products”, “construction”, “food industry”, “precious stones and jewelry”, “glass and glass”, “leather and products” leather “,” paper and paper products “,” petroleum, coal products and nuclear fuels “,” vehicles, vehicle parts and transport equipment “and” wood and wood products “slowed down and contracted.

Credit growth to the service sector grew 3.6% in November 2021 compared to 8.2% a year ago. This is a clear sign that the industry is not yet out of the setback caused by the pandemic. In the service sector, credit to transport operators contracted, from 6.8 percent growth last year to just 3.3 percent. It is revealing that despite signs of economic recovery and opening up of the economy, the movement of people is still disrupted.

The robust growth of computer software services from 1.2 percent to 6.7 percent shows that people are even more interested in working from home than last year. It is also reflected in the sharp drop in population movements outside the home. Tourism, hotels and restaurants saw a sharp decline in the deployment of credit growth in this sector, falling from 18.7% last year to just 2.0% in November 2021.

Surprisingly, credit growth to the shipping industry increased sharply from -5 percent to 40.7 percent. Aviation fell from 21.8% last year to just 6% in November 2021. There has been an improvement in professional services, but it is still negative. In November 2021, it was -4.7% against a growth of -32% last year.

The commerce sector remains of concern as growth in credit rollout fell from 15.2% last year to just 8.7% in November 2021. This decline is reflected in both wholesale trade ( other than food supply) and retail. Growth in the deployment of credit in wholesale trade was reduced to 16.1% in November 2021, from 25.4% a year ago. The same is true for commercial real estate, where credit fell from 3.5 percent last year to just 0.4 percent. Credit growth to other combined services fell from 23.9% last year to -1.7% in 2021.

Personal loans continued to grow at double-digit rates and grew by 11.6% in November 2021 from 9.2% in November 2020, driven primarily by “sustainable consumers” and “auto loans”. Last year, the growth rate of loans against gold jewelry was 56.6 percent, which remains high at 42 percent.

In the priority sector, the growth rate of credit deployment was negative in 2021 for micro and small enterprises and education loans at -2.2 and -8.5 respectively. There is a sharp increase in credit to social infrastructure from 24.4 to 82.2 percent. Thus, uneven credit flows to various sectors remain a matter of serious concern. (IPA Service)

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