Overall non-food credit offtake from the banking system has declined by Rs 142,493 crore, or 1.5 per cent, to Rs 90.69 lakh crore during the April-July period of fiscal 2020-21 as the lockdown and the contraction in the economy hit various sectors across the board. Credit outstanding to industry witnessed the biggest fall at Rs 83,835 crore, or 2.9 per cent, to Rs 28.21 lakh crore during the four-month period ended July while personal loans declined by Rs 22,418 crore to Rs 25.31 lakh crore, according to the latest data released by the Reserve Bank of India.
Within the industry segment, credit deployment by micro and small industries fell by Rs 27,097 crore, or 7.1 per cent, to Rs 3.54 lakh crore despite a host of packages rolled out by the RBI and the government to bail out thousands of small units impacted by lockdown and demand slowdown. Credit outstanding to the large industry group plunged by Rs 53,134 crore to Rs 23.64 lakh crore during the four-month period ended July 2020, according to the RBI data.
In the personal loan segment, home loan outstanding showed sluggish growth of Rs 8,601 crore to Rs 13.47 lakh crore. Credit card outstanding declined by Rs 6,703 crore to Rs 1.01 lakh crore as card users repaid outstanding spend in the wake of the tight economic conditions.
The decline in credit outstanding – which occurred when the GDP growth fell by 23.9 per cent in the first quarter — is despite the cut in policy rate by the Reserve Bank of India. Since the outbreak of the pandemic, the repo rate was cut by 75 basis points in the March policy meeting and 40 basis points in the May meeting, amounting to a total cut of 250 basis points between February 2019 and May 2020 and 115 basis points between March and May 2020. However, credit offtake has remained sluggish and growth has declined.
However, bankers are hopeful of a recovery in the third and fourth quarters. “At the outset, credit off take is not a function of interest rate alone. Looking to the lockdown condition for the last five months and negative growth in industrial output, the lower credit growth is not unexpected. The cut in repo rates and commensurate transmission by banks can only ease the supply of funds. But unless demand conditions improve (consumption and investment), we may not witness a durable credit growth. The overall economic condition is expected to improve in the third and fourth quarters of the current year,” said the CEO of a leading nationalized bank.
Meanwhile, the RBI said on a year-on-year (Y-o-Y) basis, non-food bank credit growth at 6.7 per cent in July 2020 was the same as in June 2020 but lower than the growth of 11.4 per cent in July 2019. Credit growth to agriculture and allied activities increased by 5.4 per cent in July 2020 as compared with a growth of 6.8 per cent in July 2019. Credit growth to industry slowed down to 0.8 per cent in July 2020 as compared with 6.1 per cent growth in July 2019 on a Y-o-Y basis.
The RBI said credit to the services sector continued to grow at a robust, albeit decelerated, rate of 10.1 per cent in July 2020 vis-a-vis 15.2 per cent growth in July 2019. Within this sector, credit to computer software and tourism, hotels & restaurants bucked the downtrend, registering accelerated growth in July 2020 against the growth in the corresponding month of the previous year.
Personal loans registered a growth of 11.2 per cent in July 2020 on a Y-o-Y basis as compared with 17.0 per cent growth in July 2019. Within this sector, vehicle loans registered accelerated growth in July 2020 as compared with the growth in the corresponding month of the previous year, the RBI said.
June qtr: Only 40 cases of CIRP resolved
New Delhi: Progress in the corporate insolvency resolution process (CIRP) for distressed companies slowed significantly in the quarter ending June, with only 40 cases of insolvency being resolved, as per data released by the Insolvency and Bankruptcy Board of India (IBBI). Progress in ongoing CIRP cases was the slowest since 2017 with only16 cases being resolved through successful resolution plans and 24 cases being ordered for liquidation in the quarter.
During the quarter, only 76 new insolvency cases were admitted under the Insolvency and Bankruptcy Code due to defaults prior to the Covid-19-related lockdown, as the Centre had passed an ordinance preventing any company that has defaulted on obligations between March 25 and September 25 from having to undergo CIRP. —ENS
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