Festive season retail demand, MSME drive bank loan growth in October

Credit offtake in services remains weak

Reflecting uptick in festive season demand, the bank retail credit covering housing, vehicle and credit cards etc grew by 11.7 per cent on year-on-year (YoY) basis in October 2021 up from 8.7 per cent in October 2021.

Reserve Bank of India data showed the YoY growth in housing loans was steady at 8.4 per cent in October 2021 as against 8.1 per cent a year ago. Vehicle loans rose by 8.4 per cent from 5.7 per cent during this period. The credit cards segment showed a sharp rise to 11.9 per cent in October 2021 from 5.9 per cent a year ago.

C S Setty, Managing Director (Retail & Digital Banking, State Bank of India said The credit disbursal in retail category has been good in run-up and during festival season (Dussehra and Diwali). Also, the feedback from the field indicates demand for credit has not declined sharply in the post festival period in November.      

The economic momentum is higher in the third quarter of current financial year (Q3FY22) than in the same quarter a year ago, when the economy was gradually coming out of shock from the first wave of the Covid-19 pandemic. Ahead of the busy season that starts in October, the economy grew by 8.4 per cent in the second quarter ended September 2021 (Q2FY22) as against a sharp 7.4 per cent contraction in Q2FY21.

The credit offtake in the industrial segment also showed traction in tandem with upturn in economic activity. Credit growth to industry picked up to 4.1 per cent in October 2021 from a contraction of 0.7 per cent in October 2020, RBI said.

Size-wise, Credit to micro and small industries accelerated to 11.9 per cent in October 2021 from 0.7 per cent a year ago. The schemes like government guaranteed emergency credit have helped to provide credit support to units in Covid-19 battered sectors.

The medium size segment showed growth of 48.6 per cent in October 2021 as compared to 20.8 per cent last year. The credit to large industries grew by 0.5 per cent in October 2021 as compared to a contraction of 1.8 per cent a year ago, it said.

The agriculture and allied activities continued to perform well, registering an accelerated growth of 10.2 per cent in October 2021 as compared to 7.2 per cent in October 2020.

Slowdown in credit growth of services continued, as it decelerated to 2.9. per cent in October 2021 from 8.6 per cent a year ago, RBI added.