Bank Credit Growth Sees An Uptick In March

Bank credit growth picked up in March as lenders gave out more working capital loans to businesses that had started to see early disruptions. While incremental credit saw an uptick, growth over a year ago remained tepid.

Non-food credit rose by 7.6 percent in March 2020, showed data released by the RBI on Friday. Though modestly higher than the growth of 7.3 percent in February 2020, it remained considerably lower than the 12.3 percent growth in March 2019.

Credit to several sectors, including non-bank lenders and industry, saw a modest pick-up in March.

• Credit to non-banking financial companies rose by 27.7 percent in March 2020 compared to 22.3 percent in February 2020.
• Credit to micro and small industries rose by 2.8 percent compared to a contraction of 0.4 percent in the preceding month.
• Credit to medium industries contracted by 0.4 percent compared to growth of 3.9 percent in February.
• Credit to large industries grew by 1.3 percent compared to 0.7 percent last month.
• Personal loans grew by 15.7 percent in March after rising 17 percent in February.
• The services sector saw credit grow by 8.5 percent compared to 6.9 percent in February 2020.

Higher Incremental Credit

On an incremental basis, outstanding credit grew by Rs 3.71 lakh crore over February.

This is the highest since the publication of RBI sectoral credit data, said Soumya Kanti Ghosh, group chief economic advisor at the State Bank of India. This, in turn, implies that banks may have extended substantial amount of credit in the last seven days of the year ended March 2020, including both term loans and working capital loans to companies to tide over the coronavirus crisis.

Further, credit to the NBFC sector in March expanded by a sharp Rs 1.15 lakh crore, which is the highest in 147 months, Ghosh said.

While incremental retail credit also rose, it may decline going forward with increasing restrictions of travel, deferral of home and auto purchases. However, the corporate sector may require more working capital loans as well as term loans over the medium-term until the growth environment stabilises.