Non-Food Bank Credit

Non-food bank credit continues to grow with the on-going recovery in NPAs.

Published monthly by Reserve Bank of India (RBI). Updated to February 2019 (Published on March 29th, 2019)

Recent Data Trend

The non-food bank credit reached a three-month high growth of 13.2% YoY to Rs. 83.1 trillion in February 2019 compared to 13.1% YoY in January 2019. The growth is mainly driven by an increase in credit to the industrial sector. The industry sector loans grew by 5.6% YoY in February 2019, as against 5.1% YoY in the previous month. There has been an increase in credit to large corporates which constitute more than 80% of the total industrial credit. The efforts to resolve stressed assets has been leading to an improvement in credit growth towards the industrial sector.

Micro, small, medium enterprises (MSMEs) are yet to show any sustained recovery in terms of credit inflows even after the push was given by both RBI and the government to resolve credit issues faced by this sector. The MSME sector is also facing additional challenges in accessing credit due to a liquidity crunch in the economy.

Credit to the priority sector also witnessed an upsurge of 9.8% YoY in February 2019 as against 9.4% YoY in January 2019. Within the priority sector, credit to agriculture, services, MSMEs and housing sector saw brisk growth, however, credit flow to the export sector continues to remain in negative terrain for the last two years.

Credit growth to the services sector declined marginally to 23.67% YoY compared to 23.93% YoY in the previous month. Among the services the Non-banking financial companies (NBFCs) are the fastest growing segment with a growth rate of 47.5% YoY, followed by wholesale trade (14.4% YoY). With the liquidity crisis at Infrastructure leasing and financial services (IL&FS) the NBFCs' dependence on banks has increased, due to higher cost of raising funds from the money market.

In our view, the above improvements in credit growth to different segments reflects that the fear of higher non-performing assets (NPAs) has certainly subsided in both private and public sector banks. This has been reflected in increased growth in credit to NBFCs and large corporates. As per RBI's financial stability report in December 2018, the gross NPA ratio may further decline to 10.3% in March 2019 from 10.8% in September 2018. Ensuring the availability of funds to the MSME sector should also be a priority for RBI and the government.

Brief Overview

The Bank credit in India refers to credit lending by various scheduled commercial banks (SCBs) to various sectors of the economy. The bank credit is categorized into food credit and non-food credit. The food credit indicates the lending made by banks to the Food Corporation of India (FCI) mainly for procuring foodgrains. It is a small share of the total bank credit. The major portion of the bank credit is the non-food credit which comprises of credit to various sectors of the economy (Agriculture, Industry, and Services) and also in the form of personal loans.

The data on bank credit is collected on a monthly basis by the Reserve Bank of India (RBI). The data is sourced from 46 commercial banks, accounting for about 95% of the total non-food credit deployed by all scheduled commercial banks (SCBs).

Since September 2016, credit to the industry has been slowing down, contracting by 1.7% for the first time in October 2016. The fall in credit to the industrial sector can be partly attributed to the twin-balance sheet problem (highly indebted companies and banking system plagued with rising NPAs) and partly due to a slowdown in credit demand post demonetization.

For further information, please visit the official government website.

Bank Credit to sub-sectors-Quarterly

Bank Credit to sub-sectors-Annual

Next Release Date:  April 30th, 2019