Bank credit growth slowdown a concern, says RBI

Mumbai, Dec 24 (SocialNews.XYZ) Despite the overall improvement in banking performance continuing during the first half of 2019-20, a slowing down of bank credit growth has emerged as an area of concern, the RBI said in a report released on Tuesday.

Credit growth has turned anaemic in 2019-20. Bank credit to industry decelerated in 2018-19 and in 2019-20 so far, partly tracking the slowdown in industrial production. In 2018-19, out of the 19 industry sub-groups, credit accelerated only to eight as compared with 12 in the previous year. Other sub-sectors such as food processing, textiles, paper and paper products, petroleum and coal products, gems and jewellery, and basic metals also experienced a decline in credit flows.

The banking sector's health hinges on macroeconomic turnaround, the apex bank report said while adding that credit growth negatively impacted by slowdown in global and domestic growth.

The Reserve Bank of India's report, "Trend and Progress of Banking in India 2018-19", presents the performance of the banking sector, including co-operative banks, and non-banking financial institutions during 2018-19 and 2019-20 so far. The Report on Trend and Progress of Banking in India is for the year ended June 30, 2019.

During 2018-19, bank credit to agriculture accelerated, mainly on the back of expanding the ambit of the interest subvention scheme provided by the government for ensuring availability of credit to the sector at a reasonable cost and enhancement of the limit for collateral-free agricultural loan by the Reserve Bank. However, this has declined significantly in H1, 2019-20.

Services sector credit growth accelerated on enhanced flows to shipping, trade, commercial real estate and NBFCs. Of the incremental non-food credit expansion, NBFCs accounted for 14.6 per cent - the highest amongst the services sub-sectors - reflecting the recent initiatives taken by the Reserve Bank and the government.

Source: IANS