As credit flows from banks improve with the acceleration in economic activities post the gradual lifting of the lockdown restrictions, credit growth has not been on the same lines across sectors. As per the Reserve Bank of India's data, loans towards large industries declined on the back of stressed assets in the segment, while that in the services sector increased.
Industrial credit includes credit to micro, small, medium, and large industries, depending upon the firms' investment in plant and machinery and their turnover. Large industries constituted around 82 percent of the credit offtake to the industrial sector, while the micro, small and medium industries together constituted the rest in November 2020.
Credit to the industrial sector has generally remained weak in recent years. A peak of 6.9 percent was achieved in April 2019 but there has been a continuous decline in credit offtake since then, with credit growth turning negative in October 2020, it noted. The recent decline in credit growth was mainly due to the large industries. "Owing to the stressed assets in large industries, there was a general reluctance on the part of bankers to lend to these industries, with the problem getting compounded by the pandemic," it said. The silver lining has been the robust growth of credit to the medium industries. The services sector, on the other hand, witnessed a strong credit growth.
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