Industrial loans have gradually declined over the past decade, RBI report shows

By Puja Sharma

The RBI released the ‘Basic Statistical Return on Credit by SCBs in India – March 2022’, which highlighted that the share of industrial loans in total credit has been gradually declining over the last decade while that of personal loans is on the rise.

The report further stated that despite the price effect on loan size over time, the share of loans under Rs 1 crore increased to nearly 48% in March 2022 from about 39% five years ago, while the share of loans exceeding Rs 10 crore decreased to almost 40% from roughly 49%. The RBI also said that as credit demand from the retail segment has become more distinct in recent years, the portion of small-sized loans is also going up steadily. Likewise, after declining the previous year, loans to the industrial sector saw a 4.7% gain in 2021–22.

In line with this, Dr. Jasmeet Chhabda, Sr. Vice President, Lentra, a cloud-native full-stack platform that helps across the entire lending life cycle commented on the rise of personal loans in this fiscal year and the growth in demand witnessed by the lending platform this festive season said, “We are witnessing impressive bounce back in consumer shopping and retail loans as melting uncertainties, improving economic sentiment and boosting incomes collectively revive demand.

Also, this is the first festive season in the past two years without COVID-19 restrictions on operating hours for malls and marketplaces so there is positive consumer sentiment. At Lentra, we saw an 84% surge in retail loans from in-store shopping and processed more than 1.2 lakh applications on August 15 alone, up from 65,000 on the same day in 2021.

“There is a solid festive season ahead of us and retail brands across white goods and other segments can expect a minimum demand spurt of 30% this year, especially with the streak of offers and discounts. On the other hand, our partners, including banks are extremely bullish about their sales during this time and are preparing themselves for exponential growth.” Chhabda noted.

The report captures various characteristics of bank credit such as occupation/activity and organisational sector of the borrower, type of account, and interest rates. Data reported by 89 SCBs (excluding Regional Rural Banks) are presented for bank groups, population groups, and states.

Key Highlights

• Bank credit growth (y-o-y) continued on its upward trajectory and stood at 14% in June 2022 as compared with 10.7% a quarter ago and 5.8% a year ago.
• Personal loans segment continued to lead the credit expansion and recorded 20.8% growth (y-o-y) in June 2022.
• Bank credit to industry gained momentum and its y-o-y growth increased to 7.2% in June 2022 from 4.8% a quarter ago; working capital and term loans have also moved to a double-digit growth trajectory.
• Share of individuals in total credit increased to 44.1% in June 2022 from 43.7% in the previous quarter; credit growth for female borrowers outpaced the growth in loans availed by male customers.
• Private sector banks continued to record higher credit growth than public sector banks. The share of private sector banks in total credit has increased to 38.0% in June 2022 from 35.3% in June 2020 and 22.2% in June 2015; they accounted for 47.8% of the incremental credit during the last year (June 2022 over June 2021).
• All the regions and population groups recorded double-digit credit growth (y-o-y) in June 2022.
• After declining for ten successive quarters, the weighted average lending rate (WALR) on outstanding credit increased by 21 basis points (bps) during Q1:2022-23: the increase was significant for personal loans (31 bps) and finance (36 bps).