Retail, farm credit get traction in May amid Covid-induced slowdown

Credit to Mid, small units also see higher growth

The credit in retail segment and farming gathered pace on year-on-year basis in May 2021 amid the slowdown due to the lockdown imposed to contain the second wave of Covid-19 pandemic.

However, credit growth to industry and service sector decelerated in the reporting month (May 2021), according to Reserve Bank of India (RBI) data.

In the industry segment, overall credit growth dipped to 0.8 per cent in May 2021 from 1.7 per cent a year ago. Size-wise, credit to medium industries rose by 45.8 per cent in May 2021 as compared to a contraction of 5.3 per cent a year ago. Credit growth to micro and small units accelerated to five per cent in May 2021 compared to contraction of 3.4 per cent in May 2020. The credit to large industries shrunk by 1.7 per cent in May 2021 as compared to a growth of 2.8 per cent a year ago.

The credit to agriculture and allied activities continued to perform well, registering an accelerated growth of 10.3 per cent in May 2021 as compared to 5.2 per cent in May 2020. The loans growth reflects better harvest just concluded season and also expectation of good monsoon for the third year in a row, bankers said.

Retail loans registered an accelerated growth of 12.4 per cent in May 2021 as compared to 10.6 per cent a year ago, primarily due to accelerated growth in vehicle loans and credit card outstanding, RBI said in statement.

As for services sector, the pace of credit expansion showed sharp slowdown at 1.9 per cent in May 2021 as against 10.3 percent a year ago. The slowdown was mainly due to deceleration in credit to finance companies, transport operators and commercial real estate.

However, the credit to trade segment continued to perform well, registering accelerated growth of 12.4 per cent in May 2021 as compared to 7.7 per cent a year ago, RBI added.