Bank credit growth continued to be driven by personal loans, which accounted for 27.4 per cent of total credit in September 2021 as compared with 25.0 per cent one year ago and 19.3 per cent five years ago, according to Reserve Bank of India (RBI).

Banks cautioned

In this regard, it may be pertinent to point out that the latest Financial Stability Report (FSR) has cautioned that Banks’ retail led credit growth model is confronting headwinds even as enquiry volumes point to leapfrogging of credit demand from sub-prime consumers, particularly after the second wave of the pandemic.

As private corporate sector’s demand for bank credit continued to moderate and the credit share of the household sector increased further, with the share of borrowers with relatively small-sized loans of up to ₹one crore increasing to 47.2 per cent of total credit vis-a-vis 44.4 per cent one year ago and 37.1 per cent five years ago, per RBI’s publication on Quarterly Basic Statistical Returns . Household sector includes individuals, proprietary concerns, Hindu undivided families and partnership firms, among others.

Industrial sector’s demand for bank credit moderated during the pandemic, with share in outstanding credit declining to 28 per cent in September from 29.9 per cent a year ago. The share of female individual borrowers in total credit stood at 9.8 per cent in value terms and 31.3 per cent in number of credit accounts in September, RBI said. The share of female individual borrowers in the incremental credit during the last one year was 20.5 per cent in loan amount and 44.8 per cent in terms of number of accounts.

Private banks

RBI said private sector banks continued to lead loan expansion and increased their share in total credit to 37.5 per cent in September 2021 from 35.9 per cent a year ago and 26.4 per cent five years ago. The weighted average lending rate on outstanding credit declined by 10 basis points during quarter ended September 2021 and by 61 bps over last one year.

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