Non-Food Bank Credit

Non-food bank credit continues to grow with the on-going recovery in NPAs.

Published monthly by Reserve Bank of India (RBI). Updated to January 2019 (Published on February 28th, 2019)

Recent Data Trend

The non-food bank credit (NBFC) growth continued to stay strong rising by 13.1% year-on-year (YoY) in Jan'19 compared to a growth of 9.5% YoY in the same month last year. The growth in NBFC was mainly led by an expansion in the credit to the industrial and service sector. Credit inflow to the industrial sector increased to 5.1% YoY as against 1.1% YoY growth in the corresponding period last year. The efforts to resolve stressed assets has been leading to an improvement in credit growth towards the industrial sector. From the supply side, as per RBI's recent financial stability report, the gross NPA ratio may decline to 10.3% by Mar'19, which may be viewed as a positive for industrial sector. 

Credit to the services sector has risen significantly to 23.9% YoY in Jan'19 from an increase of 13.2% YoY in January last year. The housing loans grew by 18% YoY, while vehicle loans grew by 8.6% YoY. The loans to consumer durables started to decline since Aug'18 drastically (the lowest since Dec'02) and has not seen much improvement even after six months.

Among the sub-components, credit to major sub-sectors under the industrial sector such as infrastructure, textiles, chemical and chemical products and all-engineering goods showed an increase.

The above improvements in credit growth to different segments reflects that the asset quality of banks has changed for the better. The share of gross NPAs in total advances of banks had peaked in Mar'18 and has since declined. Setting up of the Prompt Corrective Action (PCA) framework has significantly helped. To add to this, the fear of higher NPAs has certainly subsided in both private and public sector banks, as the RBI's financial stability report in Dec'18 has said that gross NPAs has declined from 11.5% in Mar'18 to 10.8% in Sep'18. This should continue to impart robustness to the financial sector as a whole.

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: March 29th, 2019