The Monetary Policy Committee (MPC) report released on Wednesday mentioned that while credit to the industrial sector shrank by 0.2 per cent, credit to medium industries saw a whopping boost of 21 per cent. The report added that these numbers reflect measures taken by Indian government and the RBI with the aim to enhance credit flows to the MSME sector.
According to the report, credit to agriculture grew by 10.2 per cent (y-o-y) in February 2021 – which is the highest since April 2017. Credit to the services sector also witnessed a strong growth.
It pointed out that credit to the industrial sector contracted mainly due to a decline in credit to large industries (which contribute to 80 per cent of credit to the industrial sector).
Within the industrial sector, the subsections which registered accelerated credit growth on an yearly basis in February 2021 are beverages and tobacco, mining and quarrying, textile, food processing, vehicle, gems and jewellery, transport equipment and vehicle parts.
“Credit growth to petroleum, coal products and nuclear fuels and cement and cement products, however, decelerated, while that to chemicals and chemical products, basic metal and metal products, construction, all engineering and infrastructure contracted,” the report read.
Contrary to the situation in the industrial sector, the services sector saw increased credit growth during H2:2020-21 (up to February 2021). What contributed to this growth was the robust credit offtake in transport operators and trade segments.
The report also mentioned that bank lending to the MSMEs have also improved mainly due to the availing of the government’s Emergency Credit Line Guarantee Scheme (ECLGS). “As on February 28, 2021, the utilisation under ECLGS stood at 82 percent,” the report added.