Bank credit shrinks 1.2% in April, gross bank credit falls to Rs 91.53 trn

Loans in the retail segment contracted 2.5 per cent to Rs 24.90 trillion

Bank credit shrank 1.2 per cent across sectors —  agriculture, industry, services, and retail — on a monthly basis in April, which was the first full month of the nationwide lockdown to contain the spread of coronavirus.

According to the Reserve Bank of India data, gross bank credit was down to Rs 91.53 trillion in April, from Rs 92.63 trillion in March. Loans to industry —large, medium, small, and micro units — declined 0.7 per cent to Rs 28.84 trillion in April.

Bankers said usually the first month of a new financial year is a lean period. But this time, demand for credit was also affected by the lockdown. May has seen some traction for credit as parts of the country saw resumption of economic activity, albeit at a lower scale.  

The trend of loan contraction was visible in the services sector covering segments like wholesale trade, retail trade, transport operators, and credit tourism, besides hotels and restaurants. 

Credit declined 0.8 per cent to Rs 25.74 trillion in April. The contraction (reduction) in loans in the retail segment was 2.5 per cent, to Rs 24.90 trillion. Credit card outstanding, a segment of the retail category, was down 10.3 per cent to Rs 96,978 crore in April, from Rs 1,08,094 crore in March 2020.

On a year-on-year (YoY) basis, gross bank credit growth decelerated to 7.4 per cent in April this year, from 11.7 per cent in the year-ago period, the RBI said in a statement.

Growth in credit to agriculture & allied activities slowed to 3.9 per cent in April 2020, from 7.9 per cent in April 2019.

Growth in credit to industry decelerated to 1.7 per cent in April 2020, from 6.9 per cent a year ago. Within industry, credit growth to 'petroleum, coal products & nuclear fuels' and ‘paper & paper products’ accelerated. However, growth in credit to mining & quarrying, chemicals & chemical products, construction, and textiles decelerated.

For the services sector, it decelerated to 11.2 per cent in April this year from 16.8 per cent a year ago. Personal loans growth decelerated to 12.1 per cent in April 2020, from 15.7 per cent in April 2019, it added.

Credit growth fell more than half YoY

Data released by the RBI showed that at the end of March, credit growth of both public sector and private sector banks was at 4.2 per cent and 9.3 per cent, respectively. This was less than half the growth recorded a year ago. Credit growth moderated across all population group — rural, semi urban, urban and metropolitan. Deposit growth, year on year, of public sector banks rose up 8.2 per cent, while deposit growth of private sector banks was at 10.4 per cent, despite moderation in the second consecutive quarter.

“The all-India credit-deposit (C-D) ratio declined to 76.0 per cent in March 2020 from 78.2 per cent a year ago. The C-D ratio declined for all population groups over this period,” RBI said. BS Reporter