Bank credit to medium-sized firms grows 21% in February, shows data

 The outstanding loans to large corporations continue to shrink as many of them have repaid existing loans

Bank credit to medium-sized firms rose 21 percent YoY in February even as a contraction (-1.5 percent) in loans to large industrial units dragged credit disbursement to industry.

In January this year, loans to large units were in the contraction zone (-2.5 percent), while for mid-sized entities it was 19.1 percent.

Credit to micro and small enterprises also inched up to 1.5 percent in February, from 0.9 percent in January, according to the Reserve Bank of India (RBI) data.

Bankers said there is a pick-up in credit due to a host of factors, including economic recovery, regulatory support, government guarantees for emergency credit, and liquidity support.

The outstanding loans to large corporations continue to shrink as many of them have repaid existing loans, taking advantage of lower interest ra­tes in a system flush with liqu­idity. While demand for working capital is rising, there is very little activity on the capital expenditure side, bankers said.

Continuing its uptrend, credit growth to agriculture and allied activities accelerated to 10.2 percent in February (5.5 percent in February 2020) from 9.9 percent in January 2021. A good monsoon and robust rural economy came as a major relief to the pandemic-battered economy.

Credit growth to the services sector accelerated to 9.3 percent in February (6.9 percent in February 2020) against 8.4 percent in January 2021.