October 04 2017

Non-Food Bank Credit

Non-food credit growth expanded by 5.5% YoY in August 2017, far below the 8.2% YoY credit growth recorded in August 2016.

Published monthly by Reserve Bank of India (RBI). Updated to the month of August 2017 (Published on September 29th, 2017)

Recent Data Trend

India's non-food credit growth stood at 5.5% year on year (YoY) in August 2017, compared to an expansion of 8.2% YoY in the corresponding period a year ago. Among the sectors, credit to service sectors continued to expand, rising by 5% YoY in August 2017. The credit growth to services sector has been on the rise since April 2017, however, it still remains far below its recent peak in March 2017 (16.9% YoY) and significantly below its year-ago growth of 12.1% YoY in August 2016.

Furthermore, the growth in personal loans continued to accelerate rising by 15.7% YoY in August 2017 but still below the 18.1% YoY growth witnessed in August 2016.

The credit growth to agricultural sector continued to decelerate for the second straight month to 6.5% YoY in August 2017, from a 13.6% YoY expansion in August 2016. In addition, the credit to industry continued to contract for the eleventh straight month. The credit to industry contracted by 0.3% YoY in August 2017, almost similar to the 0.2% YoY contraction in August 2016.

The credit growth to major industrial sub-sectors such as infrastructure, basic metal & metal products, textiles etc. witnessed contraction. The muted credit growth to industries was reflected in the dismal performance in the first quarter (April-June 2017) GDP figures, which reflected the slowdown in the economy to a 3year low growth of 5.7% YoY.

The growth in manufacturing was dismal at a 5-year low of 1.2% YoY.

The economy needs a pickup in private investment as weak investment activity and stalled projects have kept the credit growth muted. As long as the banks are plagued with high NPA problem, they will be hesitant to lend.

The credit expansion may improve in the near future as an effect of various reforms such as the Banking Regulation (Amendment) Ordinance, 2017, play out. The Ordinance empowers the Reserve Bank of India (RBI) to direct banking companies to initiate insolvency proceedings in respect of a default under the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC). It also enables the RBI to form committees to advise banking companies on the resolution of stressed assets.

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.

Next Release Date: October 27th, 2017