Non-Food Bank Credit

Industrial loans push bank credit to grow by 11.3% in September.

Published monthly by Reserve Bank of India (RBI). Updated to September 2018 (Published on October 31st, 2018)

Recent Data Trend

The non-food bank credit (NFBC) growth continued to stay strong rising by 11.3% year on year (YoY) in Sep'18 from a mere 6.1% YoY in the same month last year. The growth in NFBC was mainly led by an expansion in the credit to industrial and service sector.

Credit to service sector continued to show steady expansion and increased by 24% YoY in Sep'18, indicating individuals are expected to keep up the demand for credit. Agricultural sector witnessed a 5.8% YoY growth, same rate of increase in credit inflows as in Sep'17.

The credit to industry recorded a 2.3% YoY growth as against a contraction of 0.4% YoY in Sep'17. This growth has been the highest since the last nine months, which can be viewed as a statistical push from a favorable low base in the previous year. Since the government has also been trying to promote export growth, the industrial sectors have been receiving attention so that there can be a pickup in investment demand.

Among the sub-components, credit growth to infrastructure, textiles and chemical products witnessed an acceleration whereas, basic metal & metal products, cement and gems and jewelry saw a contraction. On the other hand, the credit to personal loans segment fell (15% YoY) as reflected by a reduction in loans to consumer durables, which fell by 81% YoY. 

If industrial loans are expected to further grow, we believe investment demand to continue to be an engine of economic growth. This is because an increase in bank credit growth translates into higher economic growth. However, we believe, two concerns continue to exist, one, from the supply side, we see more trouble as credit from non-banking financial companies (NBFC) are grippling with liquidity and higher cost of funds (due to a set of defaults by IL&FS). Second, though industrialists might want to switch to formal banks for loans, the issue of high non-performing assets might hinder banks from freely lending to all.

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: November 30th, 2018