The pace of non-food credit extended by banks in India slowed to 7.3% year-on-year in February 2020 from 13.2% in February 2019.
The decline in credit was evident in all sectors of industry, agriculture and services. However, the personal loans segment was the exception with a slight acceleration to 17% in February 2020 against 16.7% last February, according to data from the Reserve Bank of Inia.
The bankers said the lukewarm credit was a reflection of the slowing economy and extended demand. The blockade announced to fight COVID-19 created severe economic disruption, further pushing loan demand in March 2020. Normally, growth in the last month of the fiscal year is accelerating, as businesses and businesses increase usage credit limits before closing the books.
The growth in credit to industry decelerated to 0.7% in February 2020, compared to 5.6% in February 2019. In industry, the growth of credit to “beverages and tobacco” accelerated. Credit to industry segments such as “mining and quarrying”, “food processing”, “chemicals and chemicals”, “textiles”, “base metals and metal products”, engineering ”,“ leathers and leather products ”contracted in February 2020.
Credit growth in the service sector, which is a labor-intensive segment, decelerated sharply to 6.9% in February 2020 from 23.7% in February 2019, RBI said. The pace of loans to non-bank financial companies fell to 22.5% in February 2020, from 47.5% in the same month of 2019.
The banks stressed that the slowdown in credit to NBFCs should not be interpreted as a reduction in support for the liquidity sector. Indeed, banks extend their helping hand by buying loan portfolios, in particular individuals and SMEs from financial companies, to manage the difficult days.
Credit growth in agriculture and related activities slowed to 5.8% in February 2020, from 7.5% in February 2019.