The Reserve Bank of India (RBI) decision to publish data on sectoral deployment of bank credit every month will provide much-needed detail, allowing us to gauge which sectors of the economy are doing well. For instance, the data show that while bank credit to industry increased by 11.7% this fiscal year to 19 November, as much as two-thirds of that increase is on account of lending to infrastructure. Add the incremental loans to the basic metals and metal product industry (mainly loans to the iron and steel industry), which account for another 14.5% of loans to industry and over 80% of the increase in loans to industry this fiscal is accounted for. Of the total increase in non-food credit, infrastructure loans accounted for 37%.
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Also, a quarter of the increase in bank credit to industry this fiscal (up to 19 November, the latest date for which RBI has published data) is due to a rise in loans outstanding to the telecom sector, largely because of the loans given by banks to telecom companies in connection with the 3G auction.
Of the rise in total non-food credit, telecom loans accounted for 14%. Indeed, if we do not take loans outstanding to the telecom sector into account, the net addition to bank credit this fiscal to 19 November is up just 9.2%, lower than the 9.8% growth over the same period last fiscal year.
Of course, a fall in lending to the petroleum and coal products sector this fiscal, perhaps because oil companies’ cash flow improved this fiscal as a result of a hike in petrol and diesel prices. But the data is till 19 November and it’s very likely oil companies would have borrowed more since then, as crude prices have risen but diesel prices have not.
What about the housing sector? The numbers show that the increase in personal housing loans (including priority sector loans) together with the increase in lending to commercial real estate, amounted to 14.5% of the rise in non-food credit this fiscal. Another big increase has been in loans to non-banking financial companies (NBFCs). The share of incremental lending to NBFCs in the total rise in non-food credit was 7.9% of the rise in non-food credit this fiscal.
Loan outstandings to some sectors have fallen in the last two years. These include personal loans for buying consumer durables, credit card outstandings (which have fallen from Rs30,047 crore as on 21 November 2008 to Rs18,908 crore as on 19 November 2010) and, rather oddly, export credit. Outstanding loans towards export credit, classified as part of the priority sector, fell from Rs29,765 crore on 21 November 2008 to Rs29,335 crore as on 19 November 2010. That’s in spite of the fact that exports have increased from $11.5 billion (Rs51,520 crore today) in November 2008 to $18.9 billion in November 2010.
Graphic by Ahmed Raza Khan/Mint