The first four months (April-July) of the current financial year 2020-21, washed out by the COVID-19 lockdown, has seen only two segments - agri and commercial real estate - just barely managing to keep their head above the water from the overall fall in the bank credit.
While the overall outstanding bank credit (non-food) declined by 1.5 per cent at Rs 90.69 lakh crore, the agri and commercial real estate saw a marginal rise between 1-1.5 per cent at Rs 11.69 lakh crore and Rs 2.33 lakh crore, respectively.
The MSME sector, which was a beneficiary of additional funding under the 100 per cent guarantee scheme, saw the loan outstanding declining from Rs 3.81 lakh crore to Rs 3.54 lakh crore. This is the non-priority loan funding to the MSME sector. In fact, the credit numbers of August will reflect the better picture as by that time the target of Rs 3 lakh crore, which is under guarantee, may have been achieved by banks.
Surprisingly, the loan outstanding by banks to non-banking finance companies (NBFCs) also declined between March and July. It has declined from Rs Rs 8.07 lakh crore to Rs 7.93 lakh crore. The hardest hit NBFC sector, which lends to non-salaried and segments not covered by banks, is in dire need of funds post COVID-19 as they had offered loan moratorium to their customers whereas banks refused to offer them the same.
The retail banking, the growth engine for the past four-five years which compensated for the low corporate growth, will face challenges going forward. The loan outstanding has declined from Rs 25.53 lakh crore to Rs 25.31 lakh crore between March and July this year. While the banks will get the benefit of interest foregone under moratorium by adding it to the loan outstanding, the current numbers don't show up any such gains.
In some of the segments , the growth is not encouraging. Take, for instance, the two biggest growth drivers within retail have been credit card and personal loans over the last few years. These two unsecured loans are available digitally or on pre-approved basis to many salaried customers. But there is a decline in both the segments.
The credit card outstanding has declined from Rs 1.08 lakh crore to Rs 1.01 lakh crore, while personal loans have declined from Rs 7.26 lakh crore to Rs 7.21 lakh crore.