Banks disbursed more loans in FY18 till January

Despite banks raising lending rates leading to lower demand of loans, the latest RBI data suggests that lending by banks across sectors has increased in the past one year to January 2018, compared with same period last year.

The overall bank credit increased to 8.8% in 2017-18, compared to just 3.3% in 2016-17. Also, growth in bank loans were driven primarily by personal loan segment which grew 20%.

Personal loans segment includes housing and vehicle, loans. It also includes education loan, loan against fixed deposits and those taken for consumer durables. The largest public sector lender State Bank of India had raised its lending rate on March 1, which was followed by a couple of other lenders raising fears that it will make housing and vehicle loans dearer. Banks typically raise their loan rates when demand starts getting strong.

According to RBI data, loan demand in housing was strong as lending to housing rose 15.2% in the last one year, compared with the 2016-17 when it grew 13.5%. Vehicle loans, however, showed a dip in growth at 10.1%, against 18% last year.

Loans to big corporates, however, has not shown much of a growth but MSME loans have accelerated, implying banks are still wary of lending to large companies.

Non-food credit by banks grew 9.5% year-on-year in January. The rate of growth was just 3.5% in the same period last year, when demonetisation impact was at its peak. Non-food credit is money lent by commercial banks to corporates and individuals. It shows the robustness of economy activity. A higher growth indicates a pick-up in economic activity.

Loans to micro and small industries grew 6.9% from a decline of -7.4% last year, lending to large companies also grew at 0.5%, compared to a contraction in the previous year. The growth rate was slow, implying the banks are still wary of lending to big industries.

Indicating that 'Make of India' may have started picking up post demonetisation, bank loans to manufacturing sector increased close to 7% from a contraction of over 7% last year. Export credit, however contracted close to 30% from a growth of 32% last year, meaning GST woes for exporters is far from over.

Textiles, engineering, food processing and construction loans showed a growth.