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Industrial Credit Growth in FY21 Remained Negative: RBI 

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Credit growth to industry remained in negative zone during 2020-21On June 29, 2021, the publication of the Reserve Bank of India (RBI), ‘Quarterly Basic Statistical Returns (BSR)-1: Outstanding Credit of Scheduled Commercial Banks (SCBs), March 2021’, reported a ‘negative credit (loan) growth in industrial sector’ in FY21 due to COVID-19.

Key points of the report:

i.It reported continuous growth in personal loans which recorded 13.5 percent growth (Y-o-Y) in March 2021.

ii.RBI reported contraction of Working capital loans in the form of cash credit, overdraft and demand loans in FY21. The working capital loans accounted for one-third of total credit.

iii.The credit to the Household sector rose by 10.9 percent (Y-o-Y) and its share in total credit increased to 52.6 percent in March 2021 from 49.8 percent in March 2020.

  • The household sector also includes proprietary concerns, Hindu undivided families (HUF) and partnership firms, etc.

iv.The credit to the private corporate sector declined for the 6th successive quarter and its share in total credit stood at 28.3 percent.

v.Private sector banks: 

  • In comparison with other bank groups, the private sector banks recorded higher loan growth.
  • In March 2021, their share in total credit increased to 36.5 percent from 35.4 percent of March 2020 and 24.8 percent of 5 years ago.

vi.Credit growth based on bank branches:

  • Bank branches in Metropolitan areas recorded 1.4 percent growth in credit, accounting for 63 percent of bank credit.
  • The urban, semi-urban and rural areas’ Bank branches recorded double-digit credit growth (Y-o-Y) in March 2021.

vii.Weighted Average Lending Rate (WALR) on outstanding credit was declined by 21 basis points in Q4 FY21 and it has moderated by 91 basis points in FY21.

Note – The bank credit report excludes the Regional Rural Bank.

Recent Related News:

On February 16, 2021, the Reserve Bank of India (RBI) released the Draft Reserve Bank of India (Credit Derivatives) Directions, 2021 in the exercise of the powers conferred under section 45W of the RBI Act 1934 read with section 45U.

Key Roles of Reserve Bank of India (RBI):

i.Monetary policy Framing – It frames the Monetary policy of the country to meet the challenges and maintain the price stability of the economy.

ii.Control Inflation -RBI has targeted to keep the mid-term inflation of 4%(+/- 2%)

iii.Decides interest rate – A six-member monetary policy committee headed by the RBI governor, decides the benchmark repo rate.

iv.Regulates Forex – Foreign Exchange (Forex) Management Act (‘FEMA’) envisages the RBI a key role in managing Forex reserves.