Bank credit has grown at the slowest rate ever registered, indicating low lending rates, particularly from businesses, and a gradual shift by higher-rated debtors to the bond market.
According to RBI data, credit growth slowed further to 5.6 per cent in the fiscal year ended March 2021, down from 6.1 per cent in fiscal 2020. This is the most stagnant rate of growth since data on the RBI website commenced in 1965.
According to information released by the RBI on Friday, all banks’ non-meals credit stood at Rs 96.6 lakh crore as of March 26, 2021, up 4.9 per cent from Rs 92.1 lakh crore as of March 27, 2020.
Banks added Rs 2.6 lakh crore to their mortgage portfolio throughout the 12 months, bringing the total mortgage e-book to Rs 28.1 lakh crore. The share of private loans has increased from 27.7 per cent in FY20 to 29.1 per cent in FY21, approaching the allocation of credit allocated to businesses, which has decreased from 31.4% to 30.1% over the same period. The percentage of the providers’ sector in bank credit has fallen from 28.2 per cent to 27.2 per cent over the fiscal year, owing to a sharp drop in construction loans to skilled providers.
Agriculture and allied activities received the most incremental bank credit in FY21, increasing Rs 1.4 lakh crore to nearly Rs 13 lakh crore, followed by housing increased by Rs 1.2 to Rs 14.6 lakh crore. Credit to large businesses fell by 0.8 per cent, or Rs 19,608 crore, to just under Rs 24 lakh crore.
Loans to the street sector increased the most in the big business (by Rs 60,623 crore) to Rs 2.4 lakh crore. The most significant decrease was in loans to the telecom sector, which fell by Rs 30,680 crore to Rs 1.1 lakh crore. After selling a stake to international investors, Reliance Jio significantly reduced its debt. The steel industry saw its outstanding loans decrease by nearly Rs 30,000 crore for the year, owing in part to the debt decision course of some firms.
While private loans have been a massive driver of development, they have slowed in the third quarter. Personal mortgage growth slowed to 10.2 per cent in March 2021, down from 15 per cent the previous year. Car loans and loans against gold jewellery, on the other hand, continued to perform well throughout the month, registering accelerated growth.