January credit growth slows as loans to services dip by more than half the rate previous year

MUMBAI: Credit growth decelerated sharply in January posting a growth of only 8.5 per cent compared 13.1 per cent, a year ago as loans to services sector grew at less than half the pace it grew last year, while retail loan growth was flat.

Credit growth to the services sector decelerated to 8.9 per cent in January 2020 from 23.9 per cent in January 2019, according to the data released in Reserve Bank’s monthly bulletin. Retail loans, which still remained the fastest growing segment, grew by 16.9 per cent in January 2020, the same rate as in January 2019.

Among services, loans to shipping industry slowed down sharply, while loans NBFCs and retail trade too decelerated, data showed. But interestingly loans to the service sector picked up.

The overall credit growth is expected to be in the range of 6-7 per cent for the financial year 2019-20, according various forecasts by rating agencies.

Credit growth to agriculture & allied activities decelerated to 6.5 per cent in January 2020 from 7.6 per cent in January 2019.

Credit growth to industry decelerated to 2.5 per cent in January 2020 from 5.2 per cent in January 2019. Within industry, credit growth to ‘paper & paper products’, ‘rubber plastic & their products’ and ‘construction’ accelerated. However, credit growth to ‘textile’, ‘food processing’, ‘chemical & chemical products’, ‘basic metal & metal products’, ‘all engineering’ and ‘infrastructure’ decelerated/contracted.

Unlike the weekly statistical supplement, which covers the data for entire banking sector, data on sectoral deployment of bank credit collected from select 39 scheduled commercial banks, accounting for about 90 per cent of the total non-food credit deployed by all scheduled commercial banks. Hence there may not be one-to-one correlation between the two data sets.