Industrial Credit Growth Lags as Banks Step up Retail Lending

Industrial credit growth shrunk from 5 percent in December 2015 to just 1 percent in June 2016 as banks grew cautious following RBI’s Asset Quality Review. Nevertheless, retail credit has grown on a strong footing.

Between June 2008 and December 2013, industrial credit grew 22 percent on an average while credit towards retail loans averaged only 12 percent and constantly lagged industrial credit growth. However, this trend reversed since December 2013.

Industrial credit has gradually come off and fallen to a 8-year low in June 2016 indicating low capital expenditure cycle amidst high leverage in certain sectors such as steel, power and infrastructure. Nevertheless, the banks lending towards retail credit remained healthy and grew at 12-16 percent since December 2013.