While the growth has been driven by an increase in demand for credit from the retail side, the services sector too witnessed a notable increase in credit off-take. (Representational Image) While the growth has been driven by an increase in demand for credit from the retail side, the services sector too witnessed a notable increase in credit off-take. (Representational Image)

Having hit a low of 3 per cent in February 2017 post demonetisation, the gross credit growth for scheduled commercial banks has seen a smart revival in the recent months indicating an uptick in industrial activity.

Data accessed from The Reserve bank of India shows that the scheduled commercial banks consistently clocked a gross bank credit growth rate in excess of 8 per cent in the four months from November 2017 to Feb 2018, thereby indicating a sustained revival in demand for credit from banks.

While the growth has been driven by an increase in demand for credit from the retail side, the services sector too witnessed a notable increase in credit off-take. The industrial sector, which saw a contraction in credit growth continuously for 13 months beginning October 2016, saw expansion over the last four months. The credit growth for the industries grew by 1 per cent in November and expanded by 2.1 per cent in December 2017. In January and February 2018 it grew by 1.1 per cent and 1 per cent respectively.

Interestingly, the high credit growth rate has coincided with sustained high growth in index of industrial production. “Since November there has been a higher non-food credit growth and for the first time we saw more than 7 per cent growth in IIP for four consecutive months in the data series based on 2011-12. This shows that for the manufacturing sector most of the GST linked issues are getting resolved and the industry is slowly limping back to normalcy,” said DK Pant, chief economist, India Ratings.

He further added that there has been positive growth across all important segments such as primary goods, intermediate goods, capital goods among others and “it shows that the industry is recovering.”

The personal loan segment that comprises housing loan, car loan and personal loan among others witnessed a smart revival over the previous four months and hit a growth rate of 20.4 per cent in February 2018—the highest in at least 24-months. The credit growth for the personal loan segment had slipped post demonetization and hit a low of 12 per cent in February 2017. The impact of the demonetization, however, now seems to be behind with retail consumption led credit demand on a rise.

The services sector that saw credit growth slip into single digit post-demonetization (except in March 2017), witnessed a double digit growth over the last four months. It stood at 14.2 per cent in the month of February 2018.

While the retail and services sector have revived and are contributing to the growth, the infrastructure sector which has been a major contributor to the NPA woes of the banks, has yet to come out of negative growth. It has, however, seen a decline in the pace of contraction from a negative growth rate of 9.7 per cent in February 2017 to 1.9 per cent in February 2018.

Experts say that while large capital expenditure is still not happening, the credit demand from the industry is primarily for working capital requirements and even the retail consumption led demand has led to a rise in the uptick.

📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines

For all the latest Business News, download Indian Express App.