Credit to services shrinks 9.1% in April-August

There has been slowdown in credit off-take across sectors - particularly agriculture, industry, services and retail - for about 5 months since April

Commercial bank credit to the services sector contracted 9.1 per cent in April-August 2017, against 1.2 per cent growth in the year-ago period, reflecting a slowdown in the economy.

Reserve Bank of India data showed that outstanding credit to the services segments, including trade, tourism and transport operators, declined to Rs 16,37,500 crore at the end of August 18 from Rs 18,02,200 crore at the end of March.

There has been a slowdown in credit off-take across sectors — particularly agriculture, industry, services and retail — for about five months since April. Overall credit has declined 2.5 per cent to Rs 69,59,900 crore till August 18 from Rs 71,34,700 crore at the end of March. In the previous fiscal year, credit had shrunk 0.3 per cent in April-August 2016. 

 

Bankers said besides the slump in the economic activity, the transition to the goods and services tax regime from July 1 has also impacted credit demand. 
 

Business establishment are still assessing the impact of the new tax regime. Also, a huge portfolio of bad loans and challenges in raising capital have made many public sector banks wary of extending credit.

Moving to the retail segment, comprising individuals and families, loan expansion moderated to 4 per cent in April-August 2017 from 4.6 per cent a year ago. Loans for housing have stayed in the positive territory for five months of the current fiscal year (2017-18). Yet, the pace of housing loan growth was slow at 3.5 per cent in April-August 2017, down from 5.4 per cent witnessed in April-August 2016.

The roll-out of the stringent Real Estate Regulation Act has triggered major changes in the housing industry and many home buyers have kept purchase plans on hold, bankers said.

Growth in loans to buy vehicles, including two- and four-wheelers, stood at 1.7 per cent in the five months of the current fiscal year, from 3.9 per cent in the year-ago period. Credit to the consumer durables segment had shrunk in August 2017 over outstanding credit in March. For April-August 2017, credit dipped by 17.2 per cent against a growth of 7.2 per cent in April-August 2016, according to the RBI data.