The Economic Survey 2015-16 has pointed out that credit offtake by industry has been slowing. With farm sector offtake also slowing down, the only bright spot has been personal loans which have been showing healthy acceleration.
The Survey tabled by Finance Minister Arun Jaitley has said that deployment of gross bank credit to industry grew at a slow 5.3% year-on-year in December 2015. Gross bank credit to the services sector grew at below 7% in May-November 2015, though it increased to 9.2% in December 2015, the Survey pointed out.
The agriculture sector too saw a downturn from November 2014. “Only the personal loans segment, which benefited from the repo rate cut, has been showing accelerating growth from January 2015,” the Survey says.
The Economic Survey expresses concern that the share of industry has come down significantly. The decline reflects the muted markets sentiments leading to slowdown in private investment demand and industrial growth, poor earnings growth of the corporate sector, and risk aversion on the part of the banks,” it has pointed out.
Economic Survey 2015-16 states that during the current financial year, year-on-year growth in gross bank credit outstanding has remained around 10%. The sluggish growth can be attributed to incomplete transmission of the monitory policy, unwillingness of banks to lend credit on account of rising NPAs, and more attractive interest rates for borrowers in the bond markets.
The year-on-year growth in time deposits fell to 10.6% in December 2016. This is because household saving are channelised to other areas like gold and real estate. The slowdown in time deposits has been slowing the growth of bank credit as time deposits remain the most important and cheaper source of banks funding