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Banks continue to be buffeted by Covid-19 headwinds with non-food credit growth plunging to a multi-decade low of 4.9 per cent in March 2021 as compared to 6.7 per cent in March 2020. As on March 26, 2021, the outstanding non-food credit of banks stood at ₹96.62 lakh crore as against ₹92.11 lakh crore as on March 27, 2020, as per the RBI’s data on sectoral deployment of bank credit.
The data has been collected from a select 33 scheduled commercial banks (SCBs), accounting for about 90 per cent of the total non-food credit deployed by all SCBs.
“Continuing its uptrend, the credit growth to agriculture and allied activities accelerated to 12.3 per cent in March 2021 from 4.2 per cent in March 2020. Credit to industry decelerated marginally to 0.4 per cent in March 2021 from 0.7 per cent in March 2020,” the RBI said in a statement.
Services sector
However, credit to medium industries registered a robust growth of 28.8 per cent in March 2021 as compared to a contraction of 0.7 per cent a year ago. The Central bank observed that credit to micro and small industries decelerated to 0.5 per cent in March 2021 from 1.7 per cent a year ago, while credit to large industries contracted by 0.8 per cent as compared to a growth of 0.6 per cent a year ago.
The RBI said that credit growth to the services sector decelerated to 1.4 per cent in March 2021 from 7.4 per cent in March 2020, mainly due to the deceleration in credit growth to the non-banking finance companies (NBFCs) and contraction in credit to the professional services.
However, credit to the trade segment continued to perform well, registering an accelerated growth of 11.8 per cent in March 2021 as compared to 4.6 per cent a year ago.
Personal, vehicle loans
The Central bank said that the slowdown in growth of personal loans continued, as it decelerated to 10.2 per cent in March 2021 from 15.0 per cent a year ago.
However, vehicle loans and loans against gold jewellery continued to perform well during the month, registering an accelerated growth.
Meanwhile, credit rating agency ICRA cautioned that risk aversion among lenders may restrict their FY2022 credit growth, which is estimated at 7.3-8.3 per cent for banks and 7.0-9.0 per cent for non-banks.
“The likely impact of the second wave of the Covid-19 pandemic is that lenders may sacrifice growth over asset quality concerns,” said Karthik Srinivasan, Group Head – Financial Sector ratings at ICRA, in a presentation. This would reduce growth-led capital consumption, he added.
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