Non-Food Bank Credit for November 2019

A weak credit growth to industries signifies further deterioration ahead for India's industrial production.

The growth in outstanding non-food credit disbursed by scheduled commercial banks (SCBs) slowed down to 7.2% year-on-year (YoY) in November 2019 from 8.3% YoY in the pervious month. The slow down in non-food credit growth was visible across all the major sectors (industrial, personal and services).

Credit growth to industries narrowed to 2.4% YoY in November 2019 compared to 3.4% YoY in October 2019. The growth in credit to industrial segment continues to follow a downward trend which started in August 2019, although there was a marginal uptick in October 2019. Among the sub-components in this sector, credit growth to large industries (with a share of 80% within industrial segment) performed poorly in the month of November. Credit growth to major industrial sub-sectors such as infrastructure, construction, textiles continued to fall. This therefore indicates that the upcoming IIP (measure of infrastructure output) data for November 2019 is less likely to show signs of recovery.

Along with this, growth in personal loans remained resiliant, however it marginally fell to 16.3% YoY in November 2019 compared to 17.2% YoY in the pervious month. The disbursal of credit to personal vehicles happened at a slower pace of 4% YoY in November which is not a good sign for the already weak private consumption. It is important that we see a pick up in personal loans as private consumption will be a major engine for economic growth.

Thus, the subdued credit growth further reflects continuous muted demand in the economy. This slowdown also hints that the transmission of rate cut by the RBI  of 110 bps in this fiscal year has not worked in favour of creating more demand for credit.