Non-Food Bank Credit

Need to increase the availability of credit to MSME sector.

Published monthly by Reserve Bank of India (RBI). Updated till July 2019 (Published on August 30, 2019).

Recent Data Trend

India’s non-food bank credit marginally increased by 11.4% year-on-year (YoY) after moderating to a 10-month low of 11.1% (YoY) in June’19. The availability of the credit to the sectors increased substantially from 10.6% (YoY) in the comparable month last year.  Considerable increase in the flow of funds was witnessed in the credit to services sector and a slight increase in the availability of personal loans. On the other hand, the availability of credit to agricultural sector declined considerably capping the rise in the non-food credit growth.

Credit growth to the services sector elevated to 15.2% (YoY) in July’19 after falling to a 20-month low of 13% (YoY) in June 2019. The availability of personal loans marginally increased by 17% (YoY) in July’19 from 16.7% (YoY) in the comparable month last year.

Credit availability to the agricultural sector declined remarkably by 6.8% (YoY) in July’19 after rising to 16-month high by 8.7% (YoY) in June’19. Within the industrial segment, credit to the micro, small and medium enterprises (MSME) remained muted at 6.1% (YoY) in July’19 compared to 6.4% (YoY) in June’19. Meanwhile, the priority sector lending observed a decline of 7.3% (YoY) in July’19 compared to an increase of 10.2% (YoY) in June’19 (highest in almost 3 years).

Rise in availability of credit to the household sector is crucial due to a persisting slowdown in the demand from the consumers. Historically, it was always the supply side of our economy that had constrained growth. However the current situation being a demand side problem, banks should increase the availability of credit to enhance the consumption to boost economic growth.

With the disbursement of Rs 1.76 trillion including the excess reserves held by the Reserve Bank of India (RBI) to the government, we are expecting the availability of bank credit to the various sectors to increase. The merger of 10 public sector banks into four major banks would also help in the proper treatment of the non-performing assets (NPA) crisis which has become a bottleneck to the proper disbursement of the funds.   

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 years in the graph represent fiscal year.  

Deposits and Outstanding Credit-Annual

Note: In the above chart PSBs=Public Sector Banks; PVBs=Private sector banks; RRBs=Regional Rural Banks; FBs= Foreign Banks; All SCBs= All Sceduled Commerical Banks

Next Release Date:  November 30th, 2019