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Overall credit growth continues to be muted: FinMin report

Overall credit growth continues to remain muted amid weak credit demand and heightened risk aversion among banks, as per a report by the Finance Ministry.

Credit to medium enterprises, however, has witnessed an uptick, according to the Monthly Economic Review for September 2020, released by the Department of Economic Affairs on Sunday.

"Bank credit growth continued to moderate in the first six months of this year to reach 5.3 per cent as on 11th September 2020. Bank credit to the commercial sector recorded a growth of 5.4 per cent, mirroring weak credit demand and increased risk aversion in the banking system," it said.

As per the report, while credit growth to the services sector declined from 10.1 per cent YoY in July to 8.6 per cent in August, credit to trade services picked up significantly to record 12.5 per cent YoY growth.

Growth in personal loans also moderated in August, it said.

However, credit growth to medium enterprises picked up to 2.8 per cent as on August 28 as compared to (-) 3.1 per cent as on July 31.

The report noted that the overall credit to medium enterprises and credit to micro and small enterprises under priority sector lending in August may be attributed to the Emergency Credit Line Guarantee Scheme announced in May under the Aatmanirbhar Bharat economic package of the government and the Reserve Bank of India's (RBI) liquidity support measures.

As on September 29, the total amount sanctioned under the scheme by public sector banks (PSBs) and private banks to MSMEs and individuals stands at Rs 1.86 lakh crore, of which Rs 1.32 lakh crore has already been disbursed..