Credit in retail and agriculture accelerated year-on-year in June 2021, reflecting increased economic activity as states begin to gradually ease restrictions.
However, credit growth in the manufacturing and service sector slowed in the reference month (June 2021), according to data from the Reserve Bank of India.
Loans to agriculture and related activities showed accelerated growth of 11.4% in June 2021 compared to 2.4% in June 2020. The growth in loans reflects a better harvest during the Rabi season and the outlook for a good monsoon for the third year in a row, said senior executives of public sector banks.
Personal loans, covering housing and vehicles among others, saw accelerated growth of 11.9% in June 2021 from 10.4% a year ago. This is mainly due to the accelerated growth of auto loans and gold.
Retail bank lending will rise slightly from the second quarter, thanks to the gradual easing of the foreclosure and increased economic activity in the country. However, the pace will always remain lower than the growth rates observed during the pre-pandemic period. In addition, the emergence of the third wave remains a significant risk that could dampen activity, the bankers said.
According to RBI data in the pre-pandemic phase of 2019-2020, year-on-year growth in retail credit was 16.6% in June 2019.
In the industry segment, overall credit growth declined 0.3% in June 2021 compared to 2.2% growth a year ago.
In terms of size, credit to large industries fell by 3.4% in May 2021, compared to growth of 3.6% a year ago.
Credit to medium-sized industries rose 54.6% in June 2021, down from a contraction of 9% a year ago.
Credit growth to micro and small units accelerated to 6.4% in June 2021, compared to a contraction of 2.9% in June 2020.
Micro, small and medium-sized enterprises (MSMEs) credit demand increased to near pre-pandemic levels in June 2021, recovering after a drop in loan requests in April and May due to the second vague, revealed the SIDBI-TransUnion CIBIL report.
The reading of the credit check index rose from 139 in March to 67 in April before rising to 75 in May. It rose to 95 in June, CIBIL said.