After contracting for several months, banks’ credit growth started picking up at the onset of the festive season, spurred by loans to retail sectors like housing and non-banking financial sector.
Loans to industry were also in the positive territory in the month of September.
According to latest data released by the Reserve Bank of India (RBI) on deployment of bank credit by major sectors, banks had extended ₹38,417 crore to the housing sector between August 30 and September 27, followed by ₹33,150 crore to the NBFC sector.
While overall credit growth on a year-on-year basis was in single digit, at 8.2% as at September end, the same was 19.3% for the housing sector and 30.5% for the NBFC sector.
“In September, the jump in retail credit at ₹51,900 crore was nearly double that of August, of which housing loans jumped by 2.6 times in September vis-à-vis August. Bank lending to NBFC sector has remained robust and the year-to-date growth of such is highest across all segments at 11.3%,” Soumya Kanti Ghosh, group chief economic adviser, State Bank of India, said in a note.
In retail credit, loans categorised as other personal loans — which are typically unsecured loans — also showed healthy growth during the period, with banks extending ₹9,595 crore more, while vehicle loan growth was ₹784 crore in the period. Loans to commercial real estate in September also showed healthy growth of ₹2,420 crore.
According to RBI data, overall credit growth between August 30 and September 27 was ₹85,667 crore.
While credit growth to industry continued to contract, at -3.8%, in the financial year so far, for the first time this fiscal, credit to industry turned positive, jumping by ₹9,700 crore, of which ₹8,200 crore is attributable to the MSME sector, the SBI report pointed out.
To boost credit demand in a slowing economy, the RBI cut interest rates sharply in 2019, with the repo rate falling 135 basis points between February and October. The market expects further rate cut in December meeting of the monetary policy committee (MPC) though spurt in retail inflation in October could weigh in central bank’s mind.
The SBI report noted that during Apr.-Sep. of 2019, though the incremental credit to infrastructure sector declined by ₹52,100 crore, SBI’s credit to infrastructure has increased by ₹10,130 crore.
“This shows that the level of risk aversion in the banking system continues to remain asymmetric across banks and this needs to be quickly reversed if the economy were to capture growth momentum,” the report said.
