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Growth in Non-food credit at 6.8% during 12 months ended September: Credit offtake rises as home, gold, mid-sized industry loans pick up

According to latest data from the Reserve Bank of India (RBI), credit to medium industries registered a robust growth of 49.0 per cent in September 2021 as compared to 17.5 per cent last year.

Written by George Mathew | Mumbai |
October 31, 2021 3:30:53 am
Loans against gold jewellery jumped another 59.1 per cent, or Rs 23,700 crore, to Rs 63,770 crore during this period. (File)

Non-food credit offtake increased by 6.8 per cent, or Rs 6.89 lakh crore, to Rs 108.94 lakh crore during the 12-month period ended September 2021 from 5.1 per cent in the previous year, with the country lifting restrictions imposed in the wake of the Covid-19 pandemic and the economy on the comeback trail.

The rise has been aided by growth in home loans, gold lending and higher credit offtake by medium-sized industries and the agriculture sector.

According to latest data from the Reserve Bank of India (RBI), credit to medium industries registered a robust growth of 49.0 per cent in September 2021 as compared to 17.5 per cent last year. In absolute terms, credit offtake by medium industries rose by Rs 57,540 crore during the 12-month period to Rs 1,75,081 crore. This was largely due to the packages announced by the government and the RBI to meet the challenges posed by the pandemic.

Loans against gold jewellery jumped another 59.1 per cent, or Rs 23,700 crore, to Rs 63,770 crore during this period. Home loan offtake increased by 9 per cent to Rs 14.78 lakh crore and credit card outstanding rose by 9.5 per cent, or Rs 10,000 crore, to Rs 1.15 lakh crore. Consumer durables lending shot up by 40 per cent to Rs 10,904 crore as consumer confidence improved after the unlocking and decline in Covid cases.

The central bank said credit growth to industry picked up to 2.5 per cent in September 2021 from 0.4 per cent in September 2020. Credit to micro and small industries accelerated by 9.7 per cent in September 2021 from a contraction of 0.1 per cent a year ago. However, credit to large industries continued to contract at 1.0 per cent to Rs 22.59 lakh crore in September 2021 to as compared to a contraction of 0.2 per cent a year ago, the RBI said.

Agriculture loans rose by Rs 1.2 lakh crore IN the 12-month period. “Credit to agriculture and allied activities registered a higher growth of 9.9 per cent in September 2021 as compared to 6.2 per cent in September 2020,” it said.

According to the RBI, personal loans registered an accelerated growth of 12.1 per cent in September 2021 as compared to 8.4 per cent a year ago, primarily due to faster credit growth in housing, vehicle loans and loans against gold jewellery.

However, credit growth to the services sector decelerated to 0.8 per cent in September 2021 from 9.2 per cent in September 2020, mainly due to contraction/deceleration in credit growth to NBFCs, trade and commercial real estate.

Ravi Subramanian, MD & CEO of Shriram Housing Finance, said “The RBI holding rates and maintaining an accommodative stance will aid credit flow to the housing sector. Affordable housing finance has seen a pick-up in tier 2 and tier 3 cities and festive cheer along with home loan affordability being low will aid credit offtake. Mortgage lending has been the key driver of incremental credit growth in the last one year, raising the share of mortgage lending to 11 per cent of GDP.”
“The increase in bank credit reflects the low base effect and the easing of lockdown restrictions across regions in India, further supported by growth in the retail segment,” Care Ratings said in a report. Bank credit growth has remained tepid owing to risk aversion by both lenders and borrowers and regional lockdowns imposed by states in the earlier part of this year to curb the spread of coronavirus.

However, following the relaxation in lockdown since June 2021, bank credit growth has been improving gradually.

Within the industry, credit growth to all engineering, chemicals & chemical products, food processing, gems & jewellery, infrastructure, mining & quarrying, petroleum, coal products & nuclear fuels, rubber, plastic & their products, textiles, and wood & wood products accelerated in September 2021 as compared to the corresponding month of the previous year, the RBI said.

However, credit growth to beverage & tobacco, basic metal & metal products, cement & cement products, construction, glass & glassware, leather & leather products, paper & paper products, and vehicles, vehicles parts & transport equipment decelerated/contracted, it added.

Major growth factors

With people pledging gold for immediate cash requirements to meet hospital and other expenses, loans against gold jewellery saw a major jump. Housing loans, especially for affordable housing, saw a pickup as the RBI held rates and retained its policy stance. Credit offtake by industry, meanwhile, accelerated following relaxation in lockdowns across states since June.

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