Non-Food Bank Credit

Spike in credit growth to NBFCs calls for a stern watch over the sector.

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

Recent Data Trend

India’s non-food bank credit moderated to a straight eight month low of 11.4% year-on-year (YoY) in May’19. Moderation in the flow of funds was witnessed in almost all the major sectors, while the fall was capped by a slight improvement in the availability of credit for the personal loans as well as the priority sector. Credit to industry rose by 6.4% YoY in May 2019 compared to an increase of 1.4% YoY in May 2018. Lending to large industries was the highest within small, medium and large enterprises, which grew by 7.4% YoY in May 2019 as against 1.5% YoY in the respective month last year.

Credit growth to the services sector moderated to 14-month low of 14.8% YoY in May 2019 compared to 13.8% YoY in March 2018. Within the services sector, the growth in credit availability to non-banking financial companies (NBFC) spiked to 40.47% YoY in May 2019 compared to 29.97% YoY in May 2018 partly due to a reduction in the risks pertaining to the Infrastructure Leasing & Financial Services Ltd (IL&FS) led NBFC crisis. The Reserve Bank of India in its 19th issue of financial stability report, stated that the sector has been under greater market discipline due to their increased surveillance in recent times. The better companies continued to raise funds, explaining the marginal improvements in credit availability for NBFC’s.

Regardless of the increase in growth in personal loans, consumption demand of the consumers remain weak for almost all the durable goods. While we believe, the delayed monsoon can play a spoilsport, the Reserve Bank of India needs to strengthen up its scrutinization over the NBFC and the NPA crisis so that the perceived catastrophe can be curbed in. As the Insolvency and the Bankruptcy Code (IBC) becomes progressively sturdy, it is expected that persisting liquidity crisis can be controlled further enhancing the consumption demand.

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:  July 31st, 2019