Non-food credit growth of 6.8% in the 12 months ended September: lending increases as loans to individuals, gold and midsize businesses recover

Non-food credit drawdown increased 6.8%, or Rs 6.89 lakh crore, to Rs 108.94 lakh crore during the 12-month period ended September 2021, up from 5.1% in the year previous report, the country having lifted restrictions imposed in the wake of the Covid-19 pandemic and the economy on the way back.

This increase has been helped by the growth of mortgage loans, gold loans and an increase in the drawdown of credit by medium-sized industries and the agricultural sector.

According to the latest data from the Reserve Bank of India (RBI), credit to medium-sized industries saw robust growth of 49.0% in September 2021, up from 17.5% last year. In absolute terms, the lending drawdown by medium-sized industries increased by Rs 57,540 crore over the 12-month period to Rs 1,75,081 crore. This was largely due to the packages announced by the government and the RBI to meet the challenges posed by the pandemic.

Loans against gold jewelry jumped 59.1%, or 23,700 crore rupees, to 63,770 crore rupees during this period. Home loan drawdown increased 9% to Rs 14.78 crore and credit card outstanding increased by 9.5%, or Rs 10,000 crore, to Rs 1.15 crore Durable consumer goods loans rose 40% to Rs 10,904 crore as consumer confidence improved after unlocking and declining cases of Covid.

The central bank said growth in credit to industry reached 2.5% in September 2021, up from 0.4% in September 2020. Credit to micro and small industries accelerated by 9.7% in September 2021 against a contraction of 0.1% a year ago. However, credit to major industries continued to contract 1.0% to Rs 22.59 lakh crore in September 2021, down from a 0.2% contraction a year ago, the RBI said.

Agricultural loans increased by Rs 1.2 lakh crore OVER the 12 month period. “Credit to agriculture and related activities recorded higher growth of 9.9% in September 2021 compared to 6.2% in September 2020,” he said.

According to the RBI, personal loans saw an accelerated growth of 12.1% in September 2021 from 8.4% a year ago, mainly due to faster growth in home loans, car loans and loans. loans against gold jewelry.

However, credit growth to the service sector slowed to 0.8% in September 2021 from 9.2% in September 2020, mainly due to the contraction / deceleration in credit growth to NBFCs, commerce and retail. commercial real estate.

Ravi Subramanian, Managing Director and CEO of Shriram Housing Finance, said, “The RBI’s holding rates and maintaining an accommodative stance will facilitate credit flows to the housing sector. Affordable housing finance has picked up in Tier 2 and Tier 3 cities and the holiday season and low affordability of home loans will make it easier to take credit. Mortgages have been the main driver of gradual credit growth over the past year, raising the share of mortgages to 11% of GDP.
“The increase in bank credit reflects the weak base effect and the easing of foreclosure restrictions in all regions of India, supported by the growth of the retail segment,” Care Ratings said in a report. . Bank credit growth has remained subdued due to risk aversion by lenders and borrowers and regional lockdowns imposed by states earlier this year to curb the spread of the coronavirus.

However, following the easing of the lockdown since June 2021, bank credit growth is gradually improving.

Within the industry, credit growth to all sectors of engineering, chemicals and chemicals, food processing, gemstones and jewelry, infrastructure, mining and quarrying, petroleum , coal and nuclear fuel products, rubber, plastics and their products, textiles and wood and wood products accelerated in September 2021 compared to the corresponding month a year earlier, the RBI said.

However, credit growth in beverages and tobacco, basic metals and metal products, cement and cement products, construction, glass and glassware, leather and leather products, paper and paper products, and vehicles, vehicle parts and transportation equipment slowed / contracted, he added. .

Main growth factors

With people pledging gold for immediate cash needs to cover hospital and other expenses, loans against gold jewelry have surged. Home loans, especially for affordable housing, have seen a rebound as the RBI has maintained its rates and maintained its policy. Credit drawdown by industry, meanwhile, accelerated after the easing of blockages in states since June.