Non-Food Bank Credit

Non-food bank credit growth at 13.8% in Nov'18, with increased inflow of credit for services and industrial improvement.

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

Recent Data Trend

Growth in the non-food bank credit (NFBC) increased to 13.8% year on year (YoY) in Nov'18, compared to 8.8% YoY in Nov'17. The positive signs of growth in non-food bank credit can be pointed out to improvement in credit to three important segments. The credit to industrial sector showed an expansion and increased to 4% YoY as against 1% YoY growth in the corresponding period last year. Growth in credit to services sector as well as personal loans also witnessed an expansion.

Improvement in credit flows to the industrial sector comes after the push has been given to the Micro, Small and Micro Sectors (MSME) segment by the government (interest subvention of 2% for registered MSMEs, loans upto Rs.10 million through online portal). Measures announced by the RBI are also reasons for increased credit flows to MSMEs. Among the sub-components of the heavily relied sector for growth this year, the infrastructure and chemical products segment witnessed a growth.

In Nov'18, the services sector recorded a significant growth of 28.1% YoY, higher than the 14% YoY growth in the corresponding month a year ago. Lending to non-banking financial corporation (NBFC) sector witnessed a growth of 57.2% YoY compared to 13.8% YoY growth same month last year. In case of personal loans, credit growth was positive and it continued to grow by 17.3% YoY. The vehicle loans grew by 9.9% YoY and housing loans growth improved to 16.8% YoY. This explains slight improvements in consumer demand after a slowdown in economic growth Q2FY19.

The positive aspects of growth in credit has been in 3 of the 4 segments (industiral, personal, services) with the retail segment being the exception. Credit growth in the retail segment stood at 10.7% YoY in Nov'18 compared to 18.2% YoY in Nov'17. Meanwhile, the changes in foreign direct investment (FDI) policy in e-commerce to a create level-playing field between offline and online retailers can have a possible impact on the retail segment and growth in consumption in the near future.

In our view, the above improvements in credit growth to different segments reflects that the fear of higher non-performing assets (NPAs) has not restrained banks from lending to different sectors, especially to the NBFCs and credit to industries. Moving forward in 2019, ensuring economic and financial sustainability of the MSME sector should continue to be a priority for RBI as well as 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: January 30th, 2019