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Bharat has turned out to be the bright spot for banks, which clocked double-digit growth in both credit and deposits in the the rural areas in the April-June (or the first) quarter of 2020-21 vis-a-vis year ago period.
This growth came even as the larger economy contracted 23.9 per cent in the first quarter as the Covid lockdowns shut two key economic engines — Industry and Services sectors. Agriculture was the sole bright spot.
This is reflected in the aggregate bank deposits and credit for the rural population group growing 14 per cent in Q1 of FY21 (11.5 per cent in Q1FY20) and 10.5 per cent (13.8 per cent), respectively.
In the case of other population groups — semi-urban, urban and metropolitan — while the aggregate deposit growth was in double digits, credit growth slipped to single digit.
The Reserve Bank of India, in its latest Annual Report, observes that rural demand has fared better vis-a-vis urban demand.
Among underlying indicators, tractor sales picked up by 38.5 per cent in July, spurred by the robust pace of kharif sowing, while the contraction in motorcycle sales eased in July (from 35.2 per cent in June to 4.9 per cent in July), the report said.
Other population groups
Aggregate deposits and credit growth of the semi-urban population group in the first quarter was at 13.1 per cent (10.2 per cent in Q1FY20) and 8.1 per cent (12.3 per cent), respectively. For the urban population, the figures were, respectively, 12.5 per cent (9.6 per cent) and 8 per cent (10.9 per cent). For the metropolitan population group, they were 10 per cent (unchanged Q1FY20) and 5.1 per cent (11.5 per cent), respectively.
According to the report’s assessment: “Considering the small farm size in India, the self-employed in agriculture can be assumed to be relatively unscathed by the pandemic. On the other hand, 40 per cent of casual labourers in rural areas are employed in the construction sector, which has come to a complete halt during the lockdown.”
The report underscored that self-employed and casual labourers together account for 51.3 per cent of the urban workforce, and hence, the pandemic had a disproportionate impact on urban areas.
Overall, the aggregate deposits of 133 scheduled commercial banks (SCBs) accelerated to 11.5 per cent in June 2020 compared with 10.1 per cent a year ago. According to the RBI’s Quarterly Statistics on Deposits and Credit of SCBs , the increase was broad based across population groups and all bank groups recorded double-digit growth in deposits.
Bank credit growth moderated to 6.4 per cent in June 2020 from 11.7 per cent a year ago. However, rural branches continued to record double-digit credit growth.
With deposit growth outpacing credit growth, SCBs’ credit-deposit ratio declined to 73.1 per cent in Q1 against 76.7 per cent in Q1 of 2019-20.
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