Non-Food Bank Credit

Growth in Non-food bank credit at 6.7% YoY remains subdued in June.

Published monthly by Reserve Bank of India (RBI). Updated till May 2020 (Published on June 30, 2020).

Recent Data Trend

The subdued growth in non-food bank credit (NFBC) continued with little change from May level at 6.7% YoY in June. As economic activity started to revive in June the data for retail credit ie, home loans, vehicle loans and credit cards climbed up slightly compared to the pervious months. The overall growth in retail loans after shrinking for two months stood at 2.2% YoY in June up from 1.9% YoY in May.

Credit growth to industries grew by 2.2% YoY compared to 1.7% YoY growth in May 2020. The dull economic activity in the months of April and May- due to the pandemic induced lockdown measures- imposed many new challenges to banks in disbursing new credit. Risk averseness of banks is clearly visible as outstanding loans to many sectors has remained flat. There was a dip in credit growth to Micro and small enterprises as well as growth in credit to services.

In the upcoming RBI policy meet, as per analysts estimation there is likely going to be more rate reductions on reverse repurchases side. The RBI had cut reverse repo rate by 25 bps to 3.75 in April in order to nudge banks to lend more. RBI should review the economy and also look at the transmission effects of earlier rate cuts so that it pins down the trend in retail inflation.

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 annual bank credit to sub-sectors has been updated as on March 29, 2019. Non-food bank credit and it's sub-sectors as a percentage to GDP for 2019 has been calculated using FY2018-19 GDP figure. 

Next Release Date:  August 31st, 2020