Non-Food Bank Credit

Lockdown effect: Hard hit services and industrial sector receive more loans from banks

Published monthly by Reserve Bank of India (RBI). Updated till November 2019 (Published on December 31, 2019).

Recent Data Trend

The growth in non-food credit disbursed by scheduled commercial banks (SCBs) increased to 7.3% YoY in April, 2020 compared to 8% YoY in March, 2020. This comes when most of the economic activity remained suspended due to the coronavirus-led nationwide lockdown. Both, loans to industrial sector and service sector reported an acceleration in credit growth. 

Credit off-take by the industrial sector grew by 1.7% YoY in April, 2020. The loans to industries has remained sluggish since 2016, when the government announced demonetisation measures. For most industries, including manufacturing industries, to see any recovery in their operations it is important that banks lend enough to see revival in growth. Among the sub-components in this sector, credit growth to large industries only reported a positive credit growth of 2.7% in April, 2020 compared to 0.6% YoY in March. 

The sectoral bank credit data also indicated an acceleration in credit growth to services sector by 11.2% YoY in April, 2020 from 8.5% YoY in the pervious month. Within the services sector, there has been an increase in credit growth to non-banking financial corporations (NBFCs), transport operations, retail loans among others. The banking sector credit to NBFCs increased by Rs. 50 billion in April, 2020. Going forward, these sectors are likely to seek more credit to enhance operations. 

Though measures imposed by the government to curtail covid-19 pandemic disrupted economic activity, credit growth towards services sector and to large industries has seen an improvement in April, 2020. This improvement in credit growth can be attributed to the effective transmission of interest rate cuts by RBI in a timely manner.  Hard-hit businesses providing services (travel, trade, technology) will require continued support. Micro and small industries continued to see a negative credit growth, however, going forward, the government's scheme such as guaranteed Rs 3 trillion collateral free loans to small businesses and Rs 50 billion equity infusion to small businesses should help in the coming months.

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:  June 28th, 2020