Non-Food Bank Credit

Credit growth continues in services sector and personal loans.

Published monthly by Reserve Bank of India (RBI). Updated to May 2018 (Published on June 29th, 2018)

Recent Data Trend

Non-food bank credit (NFBC) grew at a 4-year high pace of 11.1% year-on-year (YoY), compared to the 4.2% YoY growth in May'17. Personal loans and credit to service sector continued to show steady expansion and increased by 18.6% YoY and 20.7% YoY, respectively. 

The credit to industry recorded a 1.4% YoY growth but it was mostly a statistical push from a favourable low base. In terms of amount, the credit to the industry has risen by less than Rs. 400 billion in the last one year.

Among the sub-components of the heavily relied sector for growth this year, the infrastructure and construction segment witnessed a contraction in the credit in May'18. The credit growth to micro and small industries (MSME) has been on the decline since Jann'18. In May'18, the credit growth was just 0.2% YoY. Credit growth in gems and jewellery sector also saw a contraction in May, and maybe a result of the unfurling of the recent scam in this sector. In March, RBI decided to discontinue issuance of letters of undertaking (LoU) and letters of comfort (LoC) for trade credit.

The subdued growth of industrial credit is expected to continue until the resolution of stressed assets and recovery in capex picks up a consistent pace. The growth in industrial production despite weak credit growth can be due to disintermediation of credit, a shift in credit demand away from traditional banking channels, towards corporate bonds or commercial papers.

In our view, the growth in overall non-food credit is mainly supported by the retail and personal loans segment. Retail sector growth is expected to continue on account of a gradual pickup in consumption demand. However, credit to industry continues to be sluggish on account of poor credit offtake in infrastructure and basic metals.

With RBI in its financial stability report June 2018 stating that the gross NPAs to rise to 12.2% by Mar'19, the credit offtake this year is suspected to take a hit.

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: July 31, 2018