The growth rate in credit offtake by home buyers and industry declined during the seven-month period ended October 2020 in the wake of the overall contraction in the economy due to the Covid pandemic, according to the Reserve Bank of India (RBI) data. The total non-food bank credit outstanding decelerated by 0.7 per cent during the seven months to Rs 91,46,631 crore from Rs 92,11,544 crore in March, compared to growth of 0.3 per cent in the year-ago period.
The overall outstanding home loans rose by just 2.6 per cent to Rs 13,73,277 crore in the April-October period, as against 9.4 per cent growth in the same period of last year. On a year-on-year basis, the growth rate fell to 8.2 per cent from 19.4 per cent a year ago, according to the latest RBI data.
On the other hand, credit to industry decelerated by 5.7 per cent in the seven-month period to Rs 27,39,841 crore from Rs 29,05,151 crore in March, compared to a contraction of 3.4 per cent a year ago. Credit outstanding of Micro, Small & Medium Enterprises (MSMEs) declined by 5.3 per cent and large industry fell by 6.7 per cent. However, medium sector showed growth of 16.6 per cent, as per the RBI data.
“On a year-on-year (Y-o-Y) basis, total non-food bank credit growth decelerated to 5.6 per cent in October 2020 from 8.3 per cent in October 2019,” the RBI said. Personal loans registered a decelerated growth of 9.3 per cent in October 2020 as compared with 17.2 per cent growth in October 2019. Within this sector, vehicle loans continued to perform well, registering accelerated growth of 8.4 per cent in October 2020 as against a growth of 5.0 per cent in October 2019. Credit growth to agriculture and allied activities accelerated to 7.4 per cent in October 2020 from 7.1 per cent in October 2019.
On a Y-o-Y basis, credit to industry contracted by 1.7 per cent in October 2020, compared with 3.4 per cent growth in October 2019, mainly on the back of contraction in credit to large industries by 2.9 per cent in October 2020 (4.2 per cent growth a year ago) though credit to medium industries registered a robust growth rate of 16.6 per cent in October 2020 (1.2 per cent a year ago).
According to Union Bank MD and CEO Rajkiran Rai, sanctions and outstanding don’t correlate. “We do a lot of investment credit by way of bonds. Corporates raised bonds but these were cheaper and they paid their loan outstanding. Further, working capital utilisation of large corporates came down during the Covid time. As a result, the credit outstanding in the system has come down. But sanctions were quite decent during this period during the comparable period of last year,” he said.
“Some segments like MSMEs and large corporates are hiring but disbursements will take some time. We expect that by March, we will see a growth rate close to double digits,” he said.
According to the RBI, within industry, credit to food processing, petroleum, coal products & nuclear fuels, leather & leather products, paper & paper products and vehicles, vehicle parts & transport equipment registered accelerated growth in October 2020 as compared with the growth in the corresponding month of the previous year. However, credit growth to beverage & tobacco, rubber plastic & their products, chemical & chemical products, cement & cement products, all engineering, gems & jewellery, infrastructure and construction contracted.
Credit growth to the services sector accelerated to 9.5 per cent in October 2020 from 6.5 per cent in October 2019. Within this sector, credit to professional services, computer software and trade registered accelerated growth in October 2020 vis-à-vis the growth in the corresponding month of the previous year, the RBI said.
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