Do it yourself

Household now largest borrowers As per the latest data released by the Reserve Bank of India, the share of personal loans in total outstanding bank credit in India has grown to 27%. For the first time, the share of personal credit in the total bank credit is higher than the credit to the industry.  In past 12 months, the share of personal credit has increased by 2%, from 25% in September 2020 to 27% in September 2021; whereas the share of industrial credit has declined by 1% from 27% to 26% over the same period. The share of credit to agriculture sector has remained mostly stagnant at around 12%. The trend could be explained, inter alia , through the following three key factors: (a)    Rising institutionalization of the personal credit due to accelerating financial inclusion and digitalization of financial transactions. (b)    Decline in share of NBFCs in the personal credit, due to a variety of reasons. (c)     Deleveraging of balance she...

  The recent data on sectoral credit distribution and growth released by RBI discloses some noteworthy trends. These trends are interesting and worrisome at the same time. In particular, the investors may take cognizance of the following trends. 1.     Overall bank credit growth for the month of August 2020 was 6% (yoy). This is the slowest growth in bank credit recorded since October 2017. It is pertinent to note because this slowest rate of growth has happened despite a slew of special credit schemes, lending concessions, and rate cuts announced by the government and RBI since May 2020. 2.     In past 10 years, the services sector has been the top performer for the Indian economy. The share of service sector in GDP is over 55%. Unfortunately, this sector has been hit the hardest by the COVID-19 induced lockdown. The credit growth to this sector has seen the sharpest drop in August. The credit growth to the sector slowed to 8.6% (yoy). NBFCs and c...