Banks See Upsurge In Rural Credit Growth

Banks are now seeing an upsurge in credit growth in rural areas, while at the same time reducing their advances in urban and semi-urban areas.

According to Reserve Bank of India’s (RBI’s) data, rural credit by scheduled commercial banks had gone up by 13.2 per cent as on December 2018 as against 11.5 per cent in the same period last year.

This has pushed up total bank credit by 12.9 per cent compared to 10.7 per cent in the corresponding period of the previous year.

It appears that banks are going slow on loan disbursals in urban and semi-urban areas. There was a steep fall in credit growth in urban and semi-urban areas at the the end of the third quarter of current fiscal year compared to year-ago period. The urban credit growth came down to 12.9 per cent from 17.6 per cent, while in semi-urban areas it dipped to 12.3 per cent from 18.9 per cent.

However, banks are bullish on metropolitan areas as credit growth jumped to 13 per cent from 7.7 per cent.

A look at individual data of banks too shows that agricultural credit, micro, small and medium enterprises loans, along with retail loans in rural areas, have been driving the growth in rural lending.

State Bank of India (SBI) reported 9.48 per cent and 2.38 per cent growth in MSME and agricultural portfolio while a good chunk of retail loan growth at 17.57 per cent growth could have come from rural markets.

There has been a clear effort from few banks to tap rural loans in areas such as agriculture. Punjab National Bank, for instance, has taken some initiatives such as online loan application and automation facility for agri and allied activities, and also set up 16 specialised agriculture focus cells.

Exceeding priority sector targets also display greater enthusiasm. PNB’s priority sector lending was at 41.95 per cent with total agriculture advance at 18.47 per cent. “The focus on small ticket loans has also been driving rural credit growth,’’ said a bank official. For Canara Bank too, agricultural advances grew at 11.20 per cent.

According to RBI, India’s agrarian economy is the source of around 15 per cent of GDP, 11 per cent of exports and provides livelihood to about half of India’s population. “The importance of the sector from a macroeconomic perspective is also reflected in a significant flow of bank credit to finance agricultural and allied activities relative to other sectors of the economy,’’ it said a recent report. All this is driving rural credit growth, say experts.