Bank credits: Infra, power sectors continue to get lion's share, says RBI

Total credit growth at the end of August 2018 grew by 12.35 per cent to Rs 78.2 trillion, compared to Rs 69.6 trillion in August-end last year, the data from the Reserve Bank of India (RBI) shows. 

Over the last one year, much of the credit disbursed by banks flowed to the personal loan segment, industries and housing loans. Credit for housing loans has grown by 17 per cent from Rs 8.9 trillion as of August 2017 to Rs 10.4 trillion at the end of August 2018. 

While credit towards personal loans, including credit cards and other instruments, has grown by 18.2 per cent from Rs 16.9 trillion in August 2017 to almost Rs 20 trillion as of August 2018. 

Credit to industry has grown marginally by less than 2 per cent, from Rs 26.1 trillion in credit disbursed by August 2017 to Rs 26.6 trillion of credit was disbursed by banks as of August 2018. 

The infrastructure has been consistently receiving the highest proportion of bank credit from Rs 8.7 trillion (August 2014) to Rs 9.2 trillion as of August 2018. This is followed by the power sector, which received Rs 5.3 trillion in credit and the metals industry that received Rs 3.8 trillion in credit by August this year. 

Credit to the metals industry is down by 7.81 per cent this year, compared to Rs 4.1 trillion worth of credit received on August 2017. 

In the services sector, credit to Non-Banking Finance Companies (NBFCs) has crossed the levels of credit deployed to trade services, for the first time in the last five years. 

Bank credit to the NBFCs has grown by 45.8 per cent, year on year, from Rs 3.4 trillion in August 2017 to Rs 4.9 trillion as of August 2018. 

Wholesale trade and retail trade credit continue to grow by over 10-15 per cent, year on year. 

The non-performing assets (NPA) crisis that has crippled lending from banks is concentrated in the metals, infrastructure (including power), construction, textiles, and manufacturing sectors, due to governance, regulatory and market factors. 

For instance, the current situation of stress and high indebtedness of many power sector companies requires clarity on larger issue of public-purchase agreements and fuel-supply linkages, without which there can be no fruitful resolution for these stressed assets. 

While there is some concentration of bank credit to specific sectors such as infrastructure, power, minerals and metal products, it is important for policymakers to ensure market fundamentals in terms of regulations and governance are corrected so that mistakes of the past are not repeated.