On July 31, 2023, the Reserve Bank of India (RBI) released a report ‘Sectoral Deployment of Bank Credit – June 2023‘ showcasing a Year-on-Year (Y-o-Y) growth of non-food bank credit to 16.3% in June 2023 as compared with 15% in June 2022.
- This rise is due to the strong demand for credit from sectors such as services, retail and agriculture, and allied activities.
- On the other hand, the food bank credit shows a decline of -25.4% in June 2023 as compared to a decline of -55% in June 2022.
- The Total Bank Credit (Food Credit + Non-food Credit) grew at 16.2% in June 2023 from 14.5% in June 2022.
Basis of Assessment:
Data on sectoral deployment of bank credit for the month of June 2023 collected from 40 select Scheduled Commercial Banks (SCBs), accounting for about 93% of the total non-food credit deployed by all SCBs
Highlights:
The following highlight shows the non-food bank credit in different sectors in June 2023 as compared to June 2022:
i.The credit growth in the agriculture and allied activities sector showed significant improvement, increasing to 19.7% (y-o-y) in June 2023 from 12.9% in June 2022.
ii.In June 2023, the credit growth to the industry sector registered a positive trend, growing by 8.1% (y-o-y)), although slightly lower than the 9.5% recorded in June 2022.
- Size-wise, credit to large industry rose by 6.4% from 3.2%.
- Credit to medium industries grew by 13.2% from 47.8%
- Credit to and micro and small industries by 13% from 29.2%.
iii.The credit growth to the services sector accelerated to 26.7% y-o-y in June 2023 from 12.8% in 2022 amid improved credit offtake to Non-Banking Financial Companies (NBFCs) and trade.
iv.Personal loans registered a growth of 20.9% (y-o-y) in June 2023 as compared to 18.1% in June 2022 supported by the increasing demand for housing and vehicle loans.
v.Among major industries, credit growth (y-o-y) to the ‘basic metal & metal products’ and ‘textiles’ sectors showed acceleration in June 2023.
vi.On the other hand, credit growth to the ‘chemicals & chemical products’, ‘food processing’, and ‘infrastructure’ sectors decelerated in June 2023.
The Story of Bank Credit to Aviation:
According to the report, the gross credit deployment in the aviation sector by 40 Indian SCBs witnessed a remarkable 93.4% year-on-year (y-o-y) surge in June 2023, reaching Rs 42,033 crore from Rs 21,733 crore in June 2022.
- This surge represents the highest monthly credit outstanding in the aviation sector since FY22.
- This also marks a month-on-month (May versus June) increase of 32%.
Key Points:
i.Investments within the aviation sector have experienced a healthy rebound in response to increased air traffic.
However, the rise in investments also reflects the necessity for additional funds due to the growth and inflationary pressures in the sector.
ii.Another reason for the increase in to overcome ATF (aviation turbine fuel) prices which surged by over 100% per barrel after the Russia-Ukraine war and remain elevated, along with COVID-19 pandemic hit.
iii.The financing support through the Finance Ministry-backed ECGLS (Emergency Credit Line Guarantee Scheme) has also contributed to the increased credit deployment in the aviation sector.
iv.The RBI considers credit deployment within the aviation sector as part of the services sector.
v.ICRA Limited (formerly Investment Information and Credit Rating Agency of India Limited) has maintained a ‘stable’ outlook for the Indian aviation industry for 2023 and expects it to remain stable in 2023-24.
vi.Domestic air traffic in June 2023 has risen 4% from pre-Covid levels, to approximately 1.25 crore passengers,.
- Crisil also reaffirmed Air India’s rating at ‘Crisil AAA / Stable / Crisil A1+’, whereas ICRA upgraded IndiGo’s rating to [ICRA]A+(Stable)/[ICRA]A1+.
About Bank Credit in India:
Bank credit is categorized into two main segments: food credit and non-food credit.
i.Food credit: This represents the lending provided by banks to the Food Corporation of India (FCI), primarily to support the procurement of foodgrains. Food credit constitutes a relatively small proportion of the overall bank credit.
ii.Non-food credit: The significant portion of bank credit falls under non-food credit, which encompasses loans extended to various sectors of the economy, including Agriculture, Industry, and Services. It also includes personal loans provided by banks.
Recent Related News:
i.According to the second advance estimates (SAE) of national income released by the National Statistical Office (NSO) the Indian economy is expected to have recorded a 7.0% growth in real GDP (Gross Domestic Product) in FY23 from 9.1% in FY22.
ii.During the June 2023 Monetary Policy Committee (MPC) meeting, the six-member MPC left the repo rate unchanged at 6.5% for the second time.
About Reserve Bank of India (RBI):
Governor – Shaktikanta Das
Deputy Governors –Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar, and
Swaminathan Janakiraman
Establishment – 1st April 1935
Headquarters – Mumbai, Maharashtra
