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Sectoral Credit Performance

26 Aug 2020

The Covid-19 pandemic caused widespread disruptions across the Indian economy and affected various sectors, since March 2020.  Among other parameters, the financial performance of the economy was also impacted and credit growth in the economy remained subdued as greater uncertainty in the economy led to depressed consumer sentiment and weakened demand conditions. 

The Gross Bank credit in the economy between June 2019 and June 2020 increased from Rs. 85,47,554.94 crores to Rs 91,36,004 crores, registering a year-on-year growth rate of around 6.9%. The growth rate was more or less the same to that recorded during May 2020. 

The components of Gross Bank Credit, i.e. food credit and non-food credit registered year-on-year growth rates of 25% and 6.7% respectively during June 2020. Food credit picked up from its previous rate of 14.2% recorded during June 2019, while non-food credit declined from its previous rate of 11.1% in June 2019. 

Among the various elements of non-food credit, gross bank lending to agriculture and allied activities during the month of June, registered a year-on-year growth rate of 2.4%. The growth rate of credit extended to the sector declined significantly from its level of 8.7%, recorded during June 2019. 

The growth rate of bank lending to industry for June stood at 2.2% for 2020 as compared to 6.4% for 2019. However, in the month of June, this slightly picked up as compared to May 2020, which stood at 1.7%.

Among the different industry sectors, the large industries registered a positive growth rate of 3.7% in June terms of bank lending, which was higher than the previous month’s growth rate of 2.8%. 

On the other hand, bank lending to both the medium sized enterprises and the micro and small enterprises contracted, and registered negative growth rates of (-) 9.0% and (-) 3.7%, respectively, between 2019 and 2020. 

While the credit growth to the services sector had slowed down during May 2019-20, during 2019-20 bank lending to the sector grew steadily, albeit at a slower pace owing to the several disruptions in the economy. The growth rate of bank lending to services during June 2020 stood at around 10.7% as compared to 13% in June 2019. 

In the services sector, bank lending to several sectors such as computer software and tourism, hotels and restaurants and commercial real estate increased significantly. On the other hand, growth of bank credit moderated for several service sectors including transport operators, professional services, retail trade and non-bank financial services registered. Bank lending to the shipping sector contracted significantly and stood at (-) 15.2% during June 2020. 

Under personal loans, the consumer durables sector received a boost in terms of bank lending and registered a growth rate of 53.3% during June 2020. This was particularly encouraging to see as the growth rate recorded by the sector during June 2019 stood at (-) 71.5%. Credit growth significantly contracted for advances against fixed deposits and education and stood at (-) 8.4% and (-) 3.9% respectively. Credit for vehicle loans on the other hand expanded from 5.1% during June 2019 to 7.1% during June 2020. 

In terms of priority sector lending, growth of bank lending to the manufacturing sector contracted significantly and declined from 0.6% during June 2019 to (-) 3.7% during June 2020. Other priority sectors, for which bank lending growth declined included housing, micro-credit and education loans. However, export credit received a boost and registered a growth rate of 17.1% during June 2020 as compared to (-) 36.1% during June 2019. 

The Government has come up with several measures to boost credit growth in the economy. While credit growth in the economy remains subdued under the present conditions, it is expected to pick up in the coming months as economic activity gathers momentum. 

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