NEW DELHI: Even as India’s economy is limping back to normalcy, industrial loans that account for 29.4% of non-food credit are dragging overall credit growth.
Latest RBI data show the industry segment grew just 1% in July 2021 driven by the MSME segment. MSME industries expanded 21.3% in July 2021 helped by the Emergency Credit Line Guarantee Scheme under which 2.14 lakh crore was disbursed.
However, growth in credit flow to large industries saw an unpleasant dip for 11 months in a row.
The share of these industries makes up for 80.5% in the total outstanding credit to industry.
The segment registered a 2.9% drop in July against 1.4% growth a year ago, underscoring a trend among firms to conserve cash, deleverage as much as possible and leave loan limits sanctioned by lenders under-utilised.
The investment climate in general was not encouraging either.
The key sectors that are deleveraging continuously include iron and steel, construction, cement and telecom.
Of the total 19 industries, six saw a drop in credit outstanding. Run-down of exposure in a few sectors led to large industry credit consolidating Rs 28 lakh crore for the past three years.
On the other hand, petroleum, rubber, plastic and nuclear fuels have been gaining credit momentum. Within the infrastructue segment, airports and roads registered a robust growth of 58.4% and 29.7%, respectively.
Analysts believe industry growth will have to emerge as a key driver to boost credit growth in the coming years.
“While it may happen with some lag, revival in consumer demand and rise in government spending can be potential triggers,” said analysts at ICICI Securities.
Growth in new loans was seen mainly in agriculture and retail segments. With easing of restrictions, retail credit was up 2.6% sequentially – the highest in the past 18 months.
Lastly, bank credit to the services sector grew 2.7% on a year-on-year basis, slower than previous month. Within services, NBFCs segment grew by only 0.5% hurting the overall credit growth.