Credit to industry contracted on a y-o-y basis for the fifth straight month in February 2017, falling 5.2% to Rs 26.01 lakh crore. (Reuters)
Incremental non-food credit during the year ended March 2017 stood at Rs 6.83 lakh crore, growing 9.52% from the end of March 2016, according to data released by the Reserve Bank of India (RBI). This is higher than the Rs 6.56 lakh crore worth of loans disbursed in FY16, even as the growth figure came in slightly lower than that year’s 10.19%.
Loan growth on a year-on-year (y-o-y) basis has remained in single digits since September 2016, when the figure stood at 12.55%. The reason for subdued credit growth in recent quarters is the prevailing environment of muted private-sector investment.
Credit to industry contracted on a y-o-y basis for the fifth straight month in February 2017, falling 5.2% to Rs 26.01 lakh crore. The figure, unchanged from that in the previous month, marks the worst industrial credit growth print in at least six years.
Increased levels of disintermediation have also hurt demand for bank credit. Money raised by companies through commercial papers and corporate bonds has touched Rs 3.7 lakh crore between April 2016 and February 2017, higher than the net non-food credit disbursed by banks, which is approximately Rs 2.35 lakh crore. The difference between the two modes of lending has risen almost 160% to Rs 1.35 lakh crore from Rs 0.52 lakh crore in FY16.
Retail credit had been holding up the headline figure for bank credit growth up to October 2016, but this segment, too, witnessed slower growth as a result of demonetisation. Loans to individuals had been clocking growth figures in the mid- to late teens since May 2015 before signs of a slowdown began to surface in November 2016. The category recorded its weakest growth in six years in February 2017, growing at just 12% y-o-y to Rs 15.4 lakh crore, as against a 19.2% growth in February 2016.