Bank credit growth slows to 8.5% in January 2020

Bank credit growth declined to 8.5 per cent in January from 13.5 per cent in the year-ago period on the back of a sharp slowdown in service sector loans, according to data compiled by the Reserve Bank of India (RBI).

Data on sectoral deployment of bank credit collected from select 39 scheduled commercial banks, accounting for about 90 per cent of the total non-food credit deployed by all scheduled commercial banks, for the month of January 2020 showed that credit growth to agriculture and allied activities decelerated to 6.5 per cent in January 2020 from 7.6 per cent in January 2019.
Growth in advances to the service sector decelerated to 8.9 per cent in January 2020 from 23.9 per cent in January 2019. During the month, personal loans segment grew by 16.9 per cent. Within personal loans, credit to housing segment grew by 17.5 per cent from 18.4 per cent, while education loan showed a negative growth of 3.1 per cent as against a negative growth of 2.3 per cent in January 2019, RBI data showed.
Flow of credit to industry decelerated to 2.5 per cent from 5.2 per cent. Within industry, loan growth to paper and paper products, rubber plastic and their products and construction accelerated. “However, credit growth to textile, food processing, chemical products, basic metal and metal products, all engineering and infrastructure decelerated,” the RBI said.
According to the latest quarterly statistics on deposits and credit of banks, bank loan growth decelerated to 7.4 per cent in October-December 2019 from 12.9 per cent in the year-ago period. During the quarter, loans by public sector banks grew by 3.7 per cent while credit from private sector banks grew 13.1 percent.
In February, RBI governor Shaktikanta Das had said slowing credit growth is the biggest challenge the banking industry was facing. “The most critical challenge today for banks, not just in India but also elsewhere, is slowing credit offtake. It affects the banks’ profitability,” Das had said.
Bank loan growth to NBFCs slowed to 32.2 per cent in the reporting month from a growth of 48.3 per cent a year-ago.