Growth in bank credit during the year was driven by personal loans and credits to agriculture and related activities. As advances to large industry have fallen, loans to the micro, small and medium-sized enterprises (MSMEs) segment have increased, supported by government-guaranteed programs. Credit growth accelerated significantly in March of this year from a lower base than the same month of 2020 due to the imposition of a foreclosure.
According to data released Friday by the Reserve Bank of India (RBI), non-food credit from all banks stood at Rs 96.6 lakh crore as of March 26, 2021 – up 4.9% from Rs 92 , 1 lakh crore as of March 27, 2020.
Banks added Rs 2.6 lakh crore to their loan portfolio during the year, bringing the loan portfolio to Rs 28.1 lakh crore. The share of personal loans increased from 27.7% in FY20 to 29.1% in FY21 and is now close to the share of credit to industry, which fell from 31.5% to 30.2% during from the same period. The share of the service sector in bank lending fell from 28.2% to 27.2% during the year due to a sharp decline in the growth of loans to professional services.
In absolute terms, the biggest consumer of additional bank credit in FY21 was agriculture and related activities which increased from Rs 1.4 lakh crore to almost Rs 13 lakh crore, followed by housing which increased from Rs 1.2 lakh crore to Rs 14.6 lakh crore. Big industry credit declined 0.8%, or Rs 19,608 crore, to just under Rs 24 lakh crore.
Within the big industry, loans to the road sector increased the most (from Rs 60,623 crore) to Rs 2.4 lakh crore. The biggest drop was in lending to the telecommunications sector, which fell from Rs 30,680 crore to Rs 1.1 lakh crore. Reliance Jio had significantly reduced its debt after selling a stake to international investors. The steel industry saw its outstanding loans decline by nearly Rs 30,000 crore during the year, in part due to the debt resolution process of some companies.
While personal loans were a major driver of growth, they slowed in the third quarter. Personal loan growth slowed to 10.2% in March 2021 from 15% a year ago. However, auto loans and gold jewelry loans continued to perform well during the month, registering accelerated growth.
According to Care Ratings, credit growth of nearly 5% is in the order of 4 to 5% predicted by the rating agency. âOverall credit to industry took a turn and was 0.4% after being negative for 11 months, while growth in large industry remains negative for the year. Credit to services growth was weaker this year at 1.4% compared to 7.4% last year. The decline was largely due to the NBFC and other services, âsaid a note from the rating agency.