Industrial loan growth turns negative in 2020-21 due to COVID-19-related disruptions: RBI data

Industrial loan growth, which has been decelerating during the last decade, turned negative for the first time during 2020-21 as economic activity slowed down in the aftermath of the COVID-19 pandemic, according to the latest RBI data. Working capital loans in the form of cash credit, overdraft and demand loans, which accounted for a third of total credit, contracted during 2020-21, the RBI said.

The RBI on Friday released data on ‘Basic Statistical Return on Credit by Scheduled Commercial Banks (SCBs) in India – March 2021’.

Personal loans continued to grow at robust pace in the last decade and their share in outstanding bank credit increased to 25.9 per cent in March 2021 from 16.4 per cent 10 years ago. It recorded double-digit growth in all the years during the interregnum, the data showed.

The number of loan accounts with schedule commercial banks (SCBs) increased by 9.5 per cent during 2020-21 to 29.8 crore in March 2021, the data showed.

The household sector accounted for 96.6 per cent of these accounts and held 53.7 per cent of the outstanding credit amount.

Private sector banks recorded higher loan growth when compared to other bank groups.

“Their share in total credit has steadily increased to 35.4 per cent in March 2021 from 20.8 per cent in March 2015 at the cost of public sector banks, whose share has come down from 71.6 per cent to 56.5 per cent over the same period,” the data showed.

Interest rates on bank loans declined further during 2020-21.

The share of loans bearing less than nine per cent interest rate was 60.7 per cent in March 2021 vis-a-vis 42.1 per cent in March 2020 and only 16.4 per cent in March 2019, the data showed.

Bank branches in urban, semi-urban and rural areas recorded double-digit credit growth during 2020-21; whereas metropolitan branches, which accounted for 61.2 per cent of total bank credit, recorded 1.4 per cent growth, the RBI data showed.