Uptick in bank credit growth augurs well for economy: RBI

The Reserve Bank of India (RBI) in its latest article has said that the uptick in the credit growth in the recent months notwithstanding the second COVID-19 wave augurs well for the economy. Bank credit growth has witnessed significant fluctuations in the past one and a half decades.

The article has noted that 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. Both dominant-group and other-group of banks lent aggressively to the industrial as well as other sectors and 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.

It further 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.