Among industries, a large portion of credit is accounted for by the larger corporates.

By Piyush Shukla

Even as bank credit to industry, which comprises 29.3% of total non-food industry credit, showed some signs of an uptick with 4.1% year-on-year rise in October, data from the Reserve Bank of India’s sectoral credit deployment shows that credit towards commercial real estate and education loans has shrunk by 0.5% and 8.7% on year, respectively.

“Banks have been following a cautious stance in underwriting over past one year owing to Covid impact and focus has been more on secured retail and working capital loans to highly rated borrowers. While banks have actively pursued stronger growth in mortgage and even in LAP (long against property) segments, they have maintained a strong control on their commercial real estate exposure in order to reduce asset quality risks given uncertain economic environment,” said Nitin Aggarwal, vice president, research-banking sector at Motilal Oswal Financial Services.

According to RBI’s data, credit to industry sector increased 4.1% on year to Rs 28,54,571 crore as on October 22. On the other hand, loans to commercial real estate fell 0.5% on year to Rs 2,53,582 crore while education loans credit deployment by banks by 8.7% to Rs 47,260 crore.

Among industries, a large portion of credit is accounted for by the larger corporates. Data shows that while bank credit to micro and small industries grew 11.9% year-on-year and loans to medium-sized industries grew 48.6% in percentage terms over the last year, advances to large corporates remained flat registering 0.5% year-on-year rise at Rs 22,70,350 crore as on October 22.

“Loan demand to industry has recovered to 4% year-on-year versus -0.7% at this time last year. This has been led by a healthy revival in micro, small and medium enterprises and to some extent has also been aided by the ECLGS (Emergency Credit Line Guarantee Scheme) disbursements made earlier. However, the growth from large industry still remains muted at 0.5% on year though capacity utilisations are improving and banks are expecting the corporate demand to recover in coming quarters led by gradual revival in capex cycle,” Aggarwal added.