Bank Credit Growth Dropped To Lowest In Over A Year In August
Rate cuts, capital infusion into public banks and easier liquidity have so far failed to boost credit growth in the economy.
Non food bank credit grew 9.8 percent year-on-year in August, moderating from 11.4 percent in July, according to data released by the Reserve Bank of India on Monday. It registered single-digit growth for the first time since March 2018.
Credit deployment moderated across all major sectors:
- Credit growth to industry stood at 3.9 percent in August as against 6.1 percent in July.
- Credit to services grew 13.3 percent compared to 15.2 percent in the preceding month.
- Personal loans rose 15.6 percent from 17 percent in July 2019.
Credit to non-banking financial companies, however, picked up. It rose 38.8 percent in August against 34.5 percent in the previous month.
Soumya Kanti Ghosh, chief economic adviser at State Bank of India, said the credit to non-bank lenders grew at the fastest pace since the liquidity crisis.
Credit to NBFC sector from banks has expanded by Rs 39,200 crore in the current fiscal as against a degrowth last year. This indicates that the news of credit freeze to NBFC sector is clearly untrue.Soumya Kanti Ghosh, Chief Economic Adviser, State Bank of India
Credit to industries fell because of a contraction in disbursments to micro, small and medium enterprises. While credit to micro and small industries contracted 2.1 percent year-on-year in August, loans to medium enterprises contracted 0.8 percent. Credit to large industries however, grew 5.1 percent.
Apart from measures taken earlier, finance Minister Nirmala Sitharaman on September 19, had announced that state-owned banks, in collaboration with 178 non-banking and housing finance companies, will hold public meetings with borrowers for disbursing loans to boost demand in the festive season.
Data from the RBI’s weekly statistical supplement suggests a reversal with credit disbursements growing by 10.3 percent in September 13 on annual basis.