Non-Food Bank Credit

Non-food bank credit growth continues to be strong, however, credit to industry yet to pickup.

Published monthly by Reserve Bank of India (RBI). Updated to the month of January 2017 (Published on February 28tth, 2018)

Recent Data Trend

The non-food bank credit (NFBC) growth continued to stay strong rising by 9.5% year on year (YoY) in Jan'18 from a mere 3.5% YoY growth in Jan'17. The improving credit growth scenario is a welcome news for the economy which had been struggling with weak credit scenario for more than a year.

The growth in NFBC in Jan'18 was accounted by an expansion in the credit to agricultural (9.4% YoY), services(13.2% YoY) and personal loans sector (20% YoY). The worrying part still persists which is weak credit growth towards industries. The credit to industries has been muted for over more than a year with industries witnessing a decline in the level of credit for almost a year. The situation changed for the better (albeit just statistical uplift) when credit to industries recorded its first expansion in over a year in Nov'17 growing by a mild 1% YoY, helped by a base effect. The credit growth in Jan'18 seems no better at 1.1% YoY.

The only thing to cheer about the low credit growth to industries is that most of the industries have started experiencing expansion in credit (13 out of the 19 industries witnessed an increase in the credit) in contrast to the uneven distribution of credit earlier. The infrastructure continued to be a laggard, recording a 2.9% YoY fall in the credit. Given the defaults accruing to the infrastructure loans made during the boom phase of 2004-09, the reluctance of banks to lend to infrastructure industries seems reasonable.

The twin balance sheet problem in the economy has brought the credit-investment cycle to a standstill due to which credit growth and investment both have suffered. However, with IBC and capital infusion of Rs.880 billion in public sector banks (PSBs) the TBS problem will subside in the coming quarters. But we await the credit towards industries to improve in order to be sure of the effectiveness of the credit to kick-start investment in the economy.

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

Next Release Date: March 31, 2018