By Sravya Vemuri
According to data released by the Reserve Bank of India, last week, there has been a 4% growth in credit to micro and small enterprises, followed by a 2.3% and 0.4% increase for medium and large enterprises respectively, for the month of February.
Non-food bank credit showcased a high credit increase of 9.8% for February 2018, as compared to a mere 3.3% increase for the same month last year. When talking about the industries that received the credit, we observe that agricultural and allied activities received an increase of 9%, while the services sector noted an increase of 14.2%.
Personal Loans
According to the data, personal loans registered the highest growth among all sectors. Personal loans recorded an increase of 20.4% for February 2018, as compared to a 12% increase for the same period in 2017.
With corporate sector lending facing a squeeze, banks are giving way credit in the form of personal loans. The domestic ratings agency, Crisil issued a report last month outlining, that the massive increase in the bad loans segment poses a risk to this increase, as most lenders focus on self-employed borrowers to fuel the home loan industry. The agency further outlined that self-employed borrowers now constitute 30% of the customers for housing finance companies, posing a greater risk to the market.
Agriculture
The credit to agriculture increased by 9%, which was the same as in February 2017, showing a consistent growth in the sector, although the debt crises continue to be unresolved. According to data released by the RBI in January, bad loans in agriculture increased by Rs 11,400 crore in 2017, marking a 23% jump.
MSME sector
The rise in credit disbursed to MSME shows that the investment in these sub-sectors is increasing at a faster pace. MSME is an important sector, as it provides an alternative to the already strained agriculture and allied sectors in rural India. The sector also provides employment to a large number of youth, which several other sectors have failed to do. Therefore, an increase in the investment rate for the sector is a good indicator of the health of the economy.
Overall takeaway
2018 has seen a revival of the credit slump from last year. However, data released from the Centre for Monitoring Indian Economy (CMIE) in January proved that investments in fresh investments touched a 13-year low for December 2017 quarter, creating an alarming picture for the economy. The data definitely shows a healthy growth in credit. However, in order to recover the country’s economy, credit should be growing at a faster pace. Any reforms to help cope with the bad loan crisis will also be a welcome step from the Government.
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