Mumbai: The uptick in the credit growth in the recent months notwithstanding the second COVID-19 wave augurs well for the economy, said an article published in the RBI’s latest bulletin.
Bank credit growth has witnessed significant fluctuations in the past one and a half decades.
The period between 2007-08 and 2013-14 could be characterised as a bank credit boom period in the Indian economy, as non-food credit registered double-digit growth, primarily driven by robust credit growth to the industrial sector, the article said.
“Both dominant-group and other-group of banks lent aggressively to the industrial as well as other sectors,” it said adding that within industries, infrastructure, and basic metal and metal product industries accounted for a major portion of credit offtake from both the bank groups during the credit boom period.
Thereafter, however, the credit cycle reversed along with a shift in the sectoral deployment of bank credit.
The article said that during 2014-15 to 2020-21, overall credit growth decelerated, primarily driven down by a reversal in credit growth to the industrial sector.
The overall non-food credit growth during 2014-15 to 2020-21 was almost entirely driven by the expansion of credit to the non-industrial sectors, particularly lending to the retail segment in the form of personal loans.
Active participation of both the dominant-group and the other-group of banks is driving credit growth to the non-industrial sectors, the article said.
The sharp slowdown in industrial credit warrants attention and steps to step up credit offtake commensurate with appropriate risk-taking, a number of which have already been taken by the government and the RBI, could de-freeze the credit market for the industrial sector. It can help in reviving the growth momentum derailed by the COVID-19 pandemic, it said.
“After witnessing a significant slowdown in credit offtake during 2019-20 and 2020-21, there has been some uptick in credit growth in the recent months notwithstanding the second COVID-19 wave, which augurs well for the economy,” the article said.
Another article published in the bulletin titled ‘Private Corporate Investment: Growth in 2020-21 and Outlook for 2021-22’ said the investment intentions of the Indian private corporates remained sluggish as reflected by lower numbers of new announcements and completions of projects.
The article highlighted that the pandemic uncertainties adversely impacted appetite for new projects during 2020-21 and posed impediments to the timely completion of pipeline projects.
In 2021-22, demand for new projects would shape the private investment outlook, along with the progress of the projects already in the pipeline, it added.
The central bank, however, said the views in the articles are of the authors and do not represent the views of the Reserve Bank of India.
PTI