While bank lending to large corporates continues to contract, lending to MSMEs, agriculture and retail picked up sharply in July this year over previous year’s levels, data on sectoral deployment of bank credit released by the Reserve Bank shows.
Much of the growth has accordingly come from urban, semi-urban and rural areas a separate release from the central bank shows. Weighted average lending rates on outstanding and fresh loans is down 91 bps and 80 bps respectively (one bps is 0.01 per cent) since the pandemic induced lockdown in March 2020, another release said.
Credit to agriculture and allied activities grew by 12.4 per cent in July 2021 as compared to 5.4 per cent in July 2020. But credit to medium industries rose at a much faster pace by 71.6 per cent in July 2021 as compared to a contraction of 1.8 per cent a year ago, thanks to initiatives and incentives by the government. Credit to micro and small industries accelerated to 7.9 per cent in July 2021 as compared to a contraction of 1.8 per cent a year ago.
Retail loans too grew at a faster pace at 11.2 per cent in July 2021 as compared to 9.0 per cent a year ago, primarily due to higher growth in ‘loans against gold jewellery’ and ‘vehicle loans’.
But credit to large industries on the other hand contracted by 2.9 per cent in July 2021 as compared to a growth of 1.4 per cent a year ago. Credit growth to the services sector slowed to 2.7 per cent in July 2021 from 12.2 per cent in July 2020, mainly due to slowdown in bank lending to ‘NBFCs’, and ‘commercial real estate’.
Overall for the April-June quarter bank credit recorded 6.0 per cent growth (year-on-year) in June 2021 compared to 6.4 per cent growth a year ago. Urban, semi-urban and rural centres recorded double-digit credit growth but it moderated for metropolitan branches to 2.7 per cent compared to 5.1 per cent a year ago.
In terms of bank groups, by private sector banks’ credit growth at (10.1 per cent was much higher than that for public sector banks at 3.1 per cent. Interestingly public sector banks transmitted more -91 bps- than private sector bank-65 bps since the pandemic induced lockdown in March 2020
Deposits growth (y-o-y) stood at 10.0 per cent in June 2021 compared to 11.5 per cent a year ago. Deposit accretion in private sector banks grew at a faster pace vis-a-vis public sector banks.
The share of current account and savings account (CASA) deposits in total deposits increased further to 43.8 per cent in June 2021 compared to 42.0 per cent a year ago.