Credit flow to industry falls, infra gains most

Despite the economy seeing revival, credit flow to the industrial sector moderated to 14.2 per cent on a year-on-year basis as of November 20, 2009, as against 37 per cent a year ago.

According to the Reserve Bank of India’s third-quarter macro-economic and monetary developments report, industry absorbed 56.1 per cent of the flow of incremental credit, while 23.7 per cent was soaked up by the agricultural sector. The share of industry in the overall non-food credit was around 50 per cent in the corresponding period last year.

The expansion of incremental non-food credit to the industry during the period was led by infrastructure. Flow of credit to the infrastructure sector went up by 47.2 per cent or Rs 107,255 crore as of November 20, 2009.
 

LOSING LUSTRE
Sectors	Y-o-Y variation

Nov 20, 2008Nov 20, 2009

Absolute

% change

Absolut

% change Non-food gross 
bank credit

5,38,144

28.002,55,73610.40 Agriculture and 
allied activities49,99421.5060,50521.40 Industry (small, 
medium and large)

2,72,698

37.001,43,54714.20 Personal loans65,90213.203,9580.70 Housing22,7139.1019,8207.30 Advances against 
fixed deposit11,02627.70-6,008-11.80 Credit cards6,14725.70-7,412-24.70 Education7,27638.308,15431.00 Consumer durables-990-9.80-1,069-11.80 Services

1,49,550

32.9047,7267.90 Transport operators7,17424.403,86210.60 Professional & other ser.19,10080.103,0257.00 Trade23,18020.5019,63214.40 Real estate25,27649.0011,73415.30 NBFCs30,14754.0016,73519.50 Figures in Rs crore                                                     Source:RBI

The report said that credit flow to agriculture remained strong despite a deficient monsoon, while credit to other sectors significantly decelerated. Credit flow to agriculture remained at 21.4 per cent compared to 21.5 per cent as of November 21, 2008.

Overall non-food bank credit grew by 10.4 per cent to Rs 255,736 crore as of November 20, 2009 (see table). During the same period last year, credit was growing at 28 per cent on the yearly basis.

Advances to the construction sector saw a drop in incremental flow of credit, as it went up by Rs 3,067 crore, or 8.9 per cent, on a year-on-year basis as of November 20, 2009, as against Rs 12,858 crore, or 59.9 per cent, in the corresponding period last year. Lower credit demand by oil companies also kept the flow to petroleum, coal products and nuclear fuels subdued at 22 per cent as against an increase of 149.2 per cent last year, when oil prices were skyrocketing.

At the same time, gems and jewellery grew at 10.2 per cent, paper and paper products witnessed an 11.2 per cent increase in credit. Micro and small enterprises, which include service sector enterprises, saw an increase of 19.3 per cent in incremental credit as against 20 per cent a year ago.

Personal loans witnessed a deceleration in credit flow at 0.7 per cent. Housing loans witnessed further moderation and grew by 7.3 per cent during the period.