Non-Food Bank Credit

Credit to service sector continues to decline despite marginal uptick in overall credit growth in October.

Published monthly by Reserve Bank of India (RBI). Updated till October 2019 (Published on November 29, 2019).

Recent Data Trend

Growth in the non-food bank credit (NFBC) stood at 8.3% YoY in October 2019 from 8.1% YoY in September. The figures for October charted a moderate expansion in overall credit as credit to industry and personal loans grew by 3.4% YoY and 17.2% YoY respectively. Though credit to industries has inched up in October, it is still a weak growth. Loans to service sector reached Rs. 23.5 trillion in October 2019, declining to a 26-month low growth of 6.5% YoY in October 2019.

Credit to service sector is on a decline for the third consecutive month reaching a single digit growth in September. NBFCs constitutes a major share of credit given to services, however the credit growth in the same has declined to 26.8% YoY in October from 40.5% YoY in the beginning of this fiscal year (April 2019 to March 2020). This decline in funds to NBFCs reflects one of the reasons for the decline in credit disbursals by NBFCs in the recent months.

On the other hand, credit disbursed to the industries (MSMEs), a reliable indicator for the industrial development, moderately inched up to 3.4% YoY in October 2019 from 2.7% YoY in the pervious month. Credit to major sub-sectors such as cement and cement products, beverage and tobacco accelerated. This comes as a good news for the cement industry which has seen a contraction for the second straight month within the core sectors in October. However, credit growth to infrastructure, textiles, and basic metals continued to decline. Under infrastructure, roads segment saw a contraction of 5.2% YoY.

Agricultural credit and priority sector lending has modestly improved from the previous month.

The marginal improvement in the bank credit can be attributed to the repo rate cut to 5.1 per cent by RBI in October. We can expect the RBI to reduce the repo rate further, in the upcoming policy meet, to boost more credit as a revival measure against the slowdown in the Indian economy, given that the GDP growth has further slowed in July-September quarter 2019 to 4.5% YoY.

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

Note: The years in the graph represent fiscal year.  

Deposits and Outstanding Credit-Annual

Note: In the above chart PSBs=Public Sector Banks; PVBs=Private sector banks; RRBs=Regional Rural Banks; FBs= Foreign Banks; All SCBs= All Sceduled Commerical Banks

Next Release Date:  December 31st, 2019