Private sector banks recorded higher loan growth compared to other bank groups (PSBs and foreign banks), with their share in total credit steadily increasing to 35.4 per cent in March 2021 from 20.8 per cent in March 2015, according to Reserve Bank of India (RBI).

This has been at the cost of public sector banks, whose share in total credit has come down from 71.6 per cent to 56.5 per cent over the same period, said the central bank.

As of March-end 2021, foreign banks had a 4 per cent market share (4.9 as of March-end 2015); regional rural banks (3.1 per cent vs 2.6 per cent); and small finance banks/ SFBs (1 per cent). SFBs became operational from 2016 onwards. At the end of March 2021, gross outstanding credit of scheduled commercial banks (SCBs) amounted ₹1,10,78,050 crore (₹68,78,400 crore as of March-end 2015).

Personal loans shine

According to the ‘Basic Statistical Return on Credit by Scheduled Commercial Banks in India’, personal loans continued to grow at a robust pace over the last decade, and their share in outstanding bank credit increasing to 25.9 per cent in March 2021 from 16.4 per cent 10 years ago.

These loans recorded double-digit growth in all the years during the interregnum. The share of personal loans in total credit stood at 24 per cent in March 2020.

The RBI said that as the number of small-sized loan accounts with banks has been increasing over the years to meet personal loan and other requirements of smaller borrowers, the average size of bank loan account has gradually declined to ₹3.7 lakh in March 2021 from ₹4.8 lakh in March 2015.

The decline in the average loan size in metropolitan branches of banks has been sharper from ₹13.5 lakh to ₹7.7 lakh over the same period.

Industrial loans

Industrial loan growth, which has been decelerating during the last decade, turned negative for the first time during 2020-21 as economic activity slowed down in the aftermath of the Covid pandemic, said the RBI. Working capital loans in the form of cash credit, overdraft and demand loans, which accounted for a third of total credit, contracted during 2020-21, said the central bank.

Working capital loans accounted for 31.9 per cent of outstanding credit of SCBs as of March-end 2021.

Interest rates on bank loans declined further during 2020-21; the share of loans bearing less than 9 per cent interest rate was 60.7 per cent in March 2021 vis-a-vis 42.1 per cent in March 2020 and only 16.4 per cent in March 2019, said the RBI.

Credit utilisation in southern region of the country has been rising continuously, and its share in total credit increased to 30.1 per cent in March 2021 from 27.5 per cent five years earlier; it surpassed the western region, where credit share declined from 32.4 per cent to 28.8 per cent over this period.

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