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Bank lending to manufacturing muted in Oct: RBI
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SME Times News Bureau | 18 Jan, 2021
Bank credit to manufacturing sector has remained muted
in the current financial year amid the pandemic, while few sectors,
including construction and trade, have witnessed resilient flows.
According
to the Financial Stability Report of the Reserve Bank of India for
January, credit growth in the manufacturing sector in October 2020
contracted by 2 per cent, while that in construction witnessed a growth
of 5.1 per cent and credit to trade, hotels and restaurants was up 13.9
per cent.
"An analysis of sectoral credit growth, specifically to
those that are critical in terms of gross value added (GVA), shows
resilient flows to sectors such as construction, trade and hospitality,
while bank credit remained muted to the manufacturing sector," the
report said.
It said that the profile of wholesale credit in
first half of 2020-21 and in the third quarter of 2020-21 (upto
November) reflects a subdued credit situation across bank groups,
pointing to risk aversion and muted demand weighing on the outlook.
With
the onset of Covid-19, retail credit growth (y-o-y) has suffered, while
wholesale credit growth has held up though at low levels.
"With
stress tests pointing to a deterioration in asset quality of banks,
early identification of impairment and aggressive capitalisation is
imperative for supporting credit growth across various sectors alongside
pre-emptive strategies for dealing with potential NPAs," it said.
As
per the report, the gross non-performing asset (GNPA) of scheduled
commercial banks (SCB) are likely to increase to 13.5 per cent by
September 2021 in the existing scenario.
In case of a severe stress, the ratio may go up to as high as 14.8 per cent, it said.
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