Robust credit growth continues, small and mid-size businesses gain

The rising pace of credit offtake continued in May, with sectors clocking year-on-year (YoY) growth between 8.7 per cent and 16.4 per cent.

The Reserve Bank of India (RBI) data showed that credit to industry grew 8.7 per cent in May (0.2 per cent in May 2021). The YoY growth in May was higher than 7.1 per cent YoY in March 2022.

Size-wise, credit to medium industries grew 49.3 per cent in May against 47.9 per cent in the year-ago month. The credit growth to micro and small industries rose to 33 per cent from 8.9 per cent a year ago. The large industries segment also grew 1.9 per cent against a contraction of 3.1 per cent in May 2021.

Bankers said besides the rise in economic activity, higher working capital limits due to rising input costs and some shift to bank loans from costly market borrowing has led to an uptick in the credit demand from industry.

   

The retail loans segment maintained its uptrend and grew 16.4 per cent in May 2022 vis-a-vis 12.8 per cent in the same month in 2021, primarily driven by housing and vehicle loans segments. The retail credit grew YoY at 12.4 per cent in March 2022.

The credit growth to services sector grew by 12.9 per cent in May 2022 (3.4 per cent a year ago), mainly due to improved offtake by NBFCs, professional services, and transport operators. The YoY growth in loans to services sector was 8.9 per cent in March 2022.

Credit growth (YoY) to agriculture and allied activities ahead of the kharif season continued to be robust at 11.8 per cent in May 2022 (9.4 per cent in May 2021). It was 9.9 per cent in March 2022.

Data on sectoral deployment of bank credit for May was collected from select 40 scheduled commercial banks. These lenders account for about 93 per cent of the total non-food credit deployed by scheduled commercial banks. The non-food bank credit grew 12.6 per cent in May 2022 against 4.9 per cent a year ago.