The industry segment, which used to be almost half of the books before the AQR started under the present government in 2015, now expanded 14.7 per cent in the last five years under the Narendra Modi government. But bank credit book has expanded from Rs 56.2 trillion in March 2014 to Rs 86.7 trillion in March 2019. Most of this growth has come from services and retail loans — a segment that has traditionally saved banks from booking large non-performing assets (NPAs) because of their comparatively lower ticket size and well-diversified clientele base.
As a result, the industry segment is roughly one-third of the banking system’s books. This has happened because banks deliberately tightened their purse strings from lending to the corporate sector, which caused them heavy NPAs in recent years.
In 2016-17 (FY17), credit to the industry witnessed de-growth of 1.9 per cent, and on that base, credit grew 0.8 per cent in 2017-18 (FY18). As a result, absolute credit to the industry remained lower than 2015-16 (FY16) levels of Rs 27.3 trillion for two consecutive years. Only in FY19, the credit book expanded.
An analysis shows that the banking industry has avoided the medium enterprises the most. After growing only 0.4 per cent in 2014-15, the medium enterprises witnessed de-growth in FY16, FY17, and FY18. Admittedly, the exposure in the medium segment is also not much — only about Rs 1 trillion for the banking industry as a whole. Large industries though, are witnessing a comeback.
But there is nothing much to cheer yet, caution experts.
“The good news is that FY19 credit growth has finally been in double digits at 12 per cent. This was driven by strong growth in retail, a pick-up in credit to the industry, and a not-so subdued growth in agri credit, even with the spate of loan waivers,” said Soumyakanti Ghosh, group chief economic advisor, State Bank of India.
“However, on the flip side, credit to the industry — mostly driven by credit to power, roads, and credit to non-banking financial companies — was mostly better rated and may not be broad-based. We need to observe how much of the credit growth momentum is maintained till the first quarter of 2019-20,” said Ghosh.
In the past five years, the growth engine for banks was the services and retail segment. Housing loans, in particular, lifted the banking sector credit growth. Besides, banks also focused on the agriculture sector in the past five years. The outstanding credit to agriculture stood at Rs 11.1 trillion by March 2019, compared with Rs 6.7 trillion at the end of March 2014.