Bank credit to industry fell for the first time in at least five years on a year-on-year (Y-o-Y) basis in August, dropping 0.2% to R26.18 lakh crore, according to data released by the Reserve Bank of India. In August 2015, the figure stood at R26.24 lakh crore, up 5% from August 2014.
A decline in credit deployment in medium and micro & small industries primarily accounted for the drop, falling 5.5% and 3.7%, respectively. Loans to large industries grew a paltry 0.7% from the previous year and stemmed the overall fall in credit to industry.
Industrial credit has been depressed since the beginning of the current financial year, struggling to clock 1% growth as banks have turned cautious amid the worsening asset quality while private investments remained muted.
In contrast, loans to individuals have been consistently clocking growth in the medium to late teens since May 2015. In August, retail loans grew more than 18% from the previous year to R14.56 lakh crore, with
housing loans making up for more than 54% of the pie. Vehicle loans accounted for nearly 11%.
Bankers say retail credit is doing well this festive season, led by the vehicles loans segment. Jaya Chakraborty, general manager for priority, RRB, MSME and retail banking at Dena Bank, said: “We are definitely seeing a pick-up in the retail segment, especially in autos. It is there in home loans as well, but not in metros. Rather, we are getting more queries from tier-II and tier-III locations.”
The bank had seen two-wheeler and four-wheeler loan disbursal to the tune of R14,000 crore during the festive season last year, and expects to surpass that figure this year, she said.
Analysts expect industrial credit offtake to languish for some more time as companies increasingly move to raise cash from money markets, which have been more effective in transmitting lower policy rates to borrowers than banks.