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Loan growth slows in infra, textile sectors

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to the industrial sector registered slower growth in May, compared with the same period of the previous year, due to slowing in credit flow to the infrastructure and textile sectors.

According to the latest data from the Reserve Bank of India (RBI), loans to the registered year-on-year growth of seven per cent till May 20, compared with 20.7 per cent a year before.

Loan growth over April to the textile sector fell 2.6 per cent.

Credit flow to industry increased 18.8 per cent in May, down from 26.7 per cent in the same month of 2011. “Deceleration in credit growth to industry was mainly due to infrastructure and textiles,” said.

Advances growth to the was 13.3 per cent, compared with 38.7 per cent during the same period of the previous year.

Slowdown in credit was evident in the commercial real estate sector, which saw a rise of 2.8 per cent in May, compared with 19.9 per cent in the same period last year.

Credit to non-banking financial companies (NBFCs), however, remained robust, though it came down from the levels of the previous tear. Data showed loans to increased by 41 per cent, compared with 54.4 per cent in May 2011.

The central bank had recently expressed concerns over the increasing reliance of gold-loan NBFCs on bank finance, as adverse development in recovery or unfavourable movement in gold prices might have a spill-over impact on the banks’ asset quality.

“The exponential growth in balance sheets of NBFCs engaged in lending against gold in recent years, coupled with the rapid rise in gold prices and expansion in the number of their branches, could be a cause of concern,” RBI said in its Financial Stability Report released yesterday.

According to the data released on Friday, non-food bank credit increased by 16.5 per cent in May, compared with 21.9 per cent in the same period last year. “Credit to agriculture increased by 14.6 per cent in May 2012, up from 12.8 per cent in May 2011,’ RBI said.

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