In a clear sign that private investment continues to be weak on the back of stagnating demand, bank credit growth to industry in October hit a six-year low, going into the negative territory at (-)1.7% to R26.05 lakh crore, according to data released by the Reserve Bank of India.
This is the second time since 2010 that the bank credit to industry was into a negative territory on a year-on-year basis — in August this year, it had slipped to (-)0.2% to R26.18 lakh crore.
Largely, the reason for this sharp decline was low offtake of credit by small and medium enterprises and also by large industries. Public sector banks turning cautious because of the worsening quality of their assets also added to lower disbursements.
Credit disbursement to medium & micro and small industries in October fell 4.3% and 3.6%, respectively, compared to the same period last year, while loans to large industry fell 1.2%. Credit to medium & micro and small industries had fallen in August as well, but large industries had recorded a 0.7% growth.
Industrial credit has been depressed since the beginning of the current financial year, struggling to clock a 1% growth.
On the other hand, loans to individuals have been growing between mid to late teens since May 2015.
In October, retail loans grew 17% from the previous year to R15.04 lakh crore, with housing loans making up for nearly 54% of the pie.
Vehicle loans accounted for more than 11%.