Small-scale industries and non-banking finance companies have seen a sharp drop in fresh bank loans as lenders are wary of sanctioning loans, fearing defaults. But the liquidity crunch for oil and fertiliser companies, due to their inability to sell products at market rates, saw credit flow to the segments more than double during the year up to mid-December 2008, latest data released by the Reserve Bank of India today revealed.
The industrial sector managed to corner 48.2 per cent of the incremental non-food credit during the year up to December 19, 2008, led mainly by higher loan flow to petroleum, chemicals and infrastructure.
Credit flow to the three segments of the economy — agriculture, industry and services — witnessed an increase during the year up to December 2008 . Overall growth in non-food credit during the period was estimated at 24.8 per cent, above the RBI’s target of 20 per cent for 2008-09.
| HOW THEY STACK UP Sectoral deployment of credit | |||
| Sectors | Outstanding as on Dec 19, ‘08 | Year-on-year variation Absolute (Rs cr) | % change |
| Non-food gross bank credit | 24,70,164 | 4,90,199 | 24.8 |
| Agriculture & allied activities | 2,89,501 | 53,612 | 22.7 |
| Industry (small, medium & large) | 10,18,564 | 2,36,064 | 30.2 |
| Small enterprises | 1,46,833 | 10,156 | 7.4 |
| Personal loans | 5,68,474 | 72,245 | 14.6 |
| Housing | 2,71,683 | 21,989 | 8.8 |
| Advances | 50,055 | 9,563 | 23.6 |
| Credit cards | 29,359 | 12,053 | 69.6 |
| Education | 26,760 | 7,233 | 37.0 |
| Consumer durables | 9,122 | 50 | 0.6 |
| Services | 5,93,625 | 1,28,278 | 27.6 |
| Transport operators | 38,145 | 8,941 | 30.6 |
| Professional & other services | 40,653 | 14,518 | 55.6 |
| Trade | 1,40,142 | 23,057 | 19.7 |
| Real estate loans | 76,463 | 24,827 | 48.1 |
| NBFCs | 86,120 | 24,668 | 40.1 |
| Source: RBI | |||
On a year-on-year (y-o-y) basis, credit to petroleum and fertiliser industries grew by by 101.8 per cent by December 2008, compared with 11.8 per rise in the corresponding period in 2007. The share of incremental petroleum and fertiliser industries rose to 19.9 per cent of the incremental non-food credit for the year up to December 2008, from 3.1 per cent a year ago.
Oil marketing companies and fertiliser producers were forced to depend on bank loans due to their inability to raise prices in line with global trends. In addition, the government did not have a Parliamentary approval to issue fresh bonds to pay its part of the subsidy Bill.
Excluding credit to these two sectors, non-food credit growth rose marginally y-o-y to 22.9 per cent for the period up to December 2008, compared with 22.1 per cent in the corresponding period in 2007.
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While there was a slowdown in fresh loan sanctions to the small scale sector, infrastructure industries were the other segments where lenders appeared bullish though the share in the overall pie dropped. The sector accounted for 28 per cent of the incremental credit to the industry, as compared with 29.7 per cent in the year up to December 2007. However, in terms of y-o-y growth, the infrastructure sector saw a 38.5 per cent rise, compared with 37.1 per cent growth witnessed in the year up to December 2007.
Textiles, food processing, iron and steel, gems and jewellery, and vehicles, vehicle parts and transport equipment witnessed a moderation in the growth rate.
While retail loan growth moderated, credit card advances saw a significant increase during the year up to December 2008. Bankers said that a part of the reason is the preference of credit card holders to roll over their dues as is often seen during a period of economic slowdown. Of late, banks have been wary of issuing fresh cards.
The other bad news came from the real estate sector where the growth in fresh advances went up. But the fear of defaults and the higher risk weights assigned by RBI earlier meant that growth in incremental credit flow to non-banking finance companies dropped from nearly 60 per cent for the year up to December 2007 to around 40 per cent up to December 2008.
Since September 2008, when the global credit crisis intensified, banks have been reluctant to lend to NBFCs prompting RBI and the government to announce a series of measures. The finance companies, however, say that banks are still not lending to them fearing high losses.