Bank credit grew by six percent on a year-on-year basis in November compared with 7.2 percent in the corresponding period in the previous year, the latest data from the Reserve Bank of India (RBI) showed.
Reversing the downtrend, credit growth to agriculture and allied activities accelerated to 8.5 percent in November 2020 from 6.5 percent in November 2019, the data showed.
Credit to industry contracted marginally by 0.7 percent in November 2020 as compared with 2.4 percent growth in November 2019, mainly due to contraction in credit to large industries by 1.8 percent in November, according to RBI data.
However, credit to medium industries registered a robust growth of 20.9 percent in November vis-a-vis contraction of 2.4 percent a year ago.
Credit growth to the services sector accelerated to 8.8 percent in November from 4.8 percent in November 2019 mainly on the back of acceleration in credit growth to ‘transport operators’ and ‘trade’ within the services sector, the RBI said.
Personal loans registered a growth of 10 percent in November as compared with 16.4 percent growth in November 2019. Within this sector, vehicle loans continued to perform well, registering an accelerated growth of 10 percent in November vis-a-vis a growth of 4.7 percent in November 2019, the data showed.
Bank lending to industries had taken a severe hit even before the COVID-19 pandemic on account of a general economic slowdown. Loan flow slowed further due to the pandemic. On account of poor loan demand and risk aversion, banks have been parking a substantial amount of funds at RBI's reverse repo window in recent months.
The government's Rs 3 lakh crore MSME credit guarantee scheme, which was rolled out early this year as part of the COVID relief economic package, helped lenders maintain credit growth into medium-sized companies. But smaller firms didn't benefit even then. Overall, banks have lent over Rs 2 lakh crore to MSMEs under this package.