Credit to farm, industry up

REPORT ON TREND AND PROGRESS OF BANKING IN INDIA 2006-07

The Reserve Bank of India's (RBIs) prudential measures of increasing risk weight and provisioning requirement have moderated credit flow to sensitive sectors.

The latest information on sectoral deployment of bank credit in 2007-08 suggests that while there was moderation in credit growth across all major sectors, there was some rebalancing in the sectoral allocation of credit in favour of agriculture and industry.

The finance minister and RBI have been time and again urging banks to rebalance their portfolio by moderating the flow of credit to certain sectors and protecting asset quality.

Bank credit to agriculture and allied activities and industry increased by 24.4 per cent to Rs 43,326 crore and 24.6 per cent to Rs 1,40,531 crore as on August 17, 2007 respectively. 
 

CREDIT CARD Sectoral Deployment of Non-food Credit
Sector	2005-06		2006-07
	Rs crore	In %	Rs crore	In %
Agriculture and Allied Activities	49,606	39.9	56,305	32.4
Industry (Small, Medium and Large)	1,26,804	30.0	1,41,543	25.7
of which: SSI	16,831	22.7	25,888	28.4
Personal Loans	1,03,733	40.5	95,422	26.5
of which: Housing	51,273	38.3	45,508	24.6
Other Services	1,18,254	58.8	98,857	31.0
of which:
i) Wholesale trade	8,025	25.4	9,922	25.1
ii) Real Estate	13,147	97.1	18,635	69.8
iii) Non-Banking
Financial Companies	11,463	50.3	14,226	41.5
Total Non-Food Gross
Bank Credit	3,98,396	39.6	3,92,128	27.9
of which, Priority Sector	1,35,222	36.1	1,22,472	24.0

During 2006-07, rapid bank credit growth in the real estate, housing, personal loans, including credit cards, has decelerated further significantly. Bank credit to other fast growing sectors such as computer software, trade and transport operators also moderated.

Within the industrial sector, credit expansion to the infrastructure, metals and textiles sectors has been strong. Bank credit to the infrastructure sector grew by 32.1 per cent to Rs 37,509 crore as on August 17, 2007, while credit to the textile sector increased by 28 per cent to Rs 17,378 crore.

However, RBI has warned banks that though they have a role to play in meeting the medium- and long-term funding requirements of the economy, banks need to ensure that such lending operations do not result in asset-liability mismatches.