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Data: Outstanding Credit of SCBs towards personal loans more than doubled in the last five years

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Unlike in the case of ‘Outstanding Credit’ of Scheduled Commercial Banks (SCBs) to Industry & Agriculture, there has been a steep increase in ‘Outstanding Credit’ of ‘Personal Loans’. The ‘Outstanding Credit’ of personal loans of SCBs increased from Rs. 12.58 lakh crores by the end of March 2016 to Rs. 28.74 lakh crores by the end of March 2021. 

In the first part of this series on ‘Outstanding Credit’, we looked at the trends in the outstanding credit of Scheduled Commercial Banks (SCBs) across the states, based on the data provided by RBI in its Handbook of Statistics on Indian States. In the first part, we specifically focused on the outstanding credit of SCBs to the Agricultural sector and Industry. 

In the first part of this series, we highlighted that there is a consistent increase in the ‘Outstanding credit’ of personal loans over the years, and even during the pandemic year contrary to the trend observed in ‘Outstanding credit’ of SCBs to Industry. In this story, we look at the trends across the states and further look at the outstanding credit of Regional Rural Banks (RRBs). 

More than 60% of the latest ‘Outstanding Credit’ of Personal loans from Southern & Western regions 

In the earlier story, we observed that huge variation exists between the regions in terms of the value of ‘Outstanding credit’ of SCBs. This variation is more evident in the case of outstanding credit of personal loans. 

As of the end of March 2021, out of the total ‘Personal Loan’ outstanding credit of Rs. 28.73 lakh crores, around 36% is from the Southern region. Another quarter i.e., around 25.5% outstanding credit is from the Western region. Out of the 6 regions as categorized by RBI in its report, these two regions constitute 60% of the personal loan outstanding credit as of the end of March 2021.

The Northern, Central & Eastern regions rank next. The Northeast region has the lowest outstanding credit of Rs. 64 thousand crores by the end of March 2021, which is just about 2% of the total outstanding credit. 

While the positions remained the same in the last 15-year period (2007-2021), there is a variation in the growth by region over the years. Particularly since 2017, the ‘Outstanding Credit’ of Personal loans in the Southern Region has witnessed a significant increase. 

5 States account for more than 50% of the Outstanding credit of Personal loans

The imbalance in the ‘Outstanding credit’ observed among the regions is also a reflection of the huge variance among the states. All the five states of the Southern region, which has the highest outstanding credit of personal loans, are among the top-10 states in terms of outstanding credit of personal loans by the end of March 2021.  

  • The majority of the ‘Outstanding Credit’ of the Western region is contributed by Maharashtra & Gujarat. 
  • By the end of March 2021, Maharashtra has the highest amount of Outstanding credit with Rs. 525 thousand crores i.e., around 18% of the total ‘Outstanding Credit’. It is higher than the total ‘Outstanding Credit’ in each of the 4 other regions (excluding Southern & Western). 
  • The top-five states of Maharashtra, Karnataka, Tamil Nadu, Telangana & Gujarat account for more than 50% of the total ‘Outstanding Credit’ of personal loans by the end of March 2021.
  • Unlike in the case of Agricultural & Industrial credit, the ‘Outstanding Credit’ of personal loans across the top-ranking states has witnessed a year-on-year increase. (The bifurcated states of Andhra Pradesh being an exception in 2015) 
  • The top-5 states also report a higher growth since 2017 with the growth in outstanding credit of Maharashtra being more prominent. 

While the data for the exact amount of credit extended in each financial year is not available, the trends in ‘Outstanding Credit’ serve as an important proxy to estimate the amount of credit extended. The data shows that there have not been any major positional changes in the states regarding the ‘Outstanding Credit’ of personal loans. The states which traditionally have higher ‘Outstanding Credit’ continue to do so, and the states especially in the East & Northeast reporting low amounts of ‘Outstanding Credit’. In fact, the gap is becoming more widespread with the top states continuing to report a higher outstanding credit as time years pass by. 

While these trends broadly reflect the quantum of economic activity & GSDP of the states, SCBs could do well to ensure a more equitable distribution of credit.

‘Outstanding Credit’ of RRBs increased 7-fold between 2007-2021

Regional Rural Banks are government-owned Scheduled Commercial banks, with a primary focus on providing Banking and financial services at the Rural level. They mostly provide credit for agriculture and other rural sectors. Some of these banks may also have urban operations. 

As per the data provided by RBI, the ‘Outstanding Credit’ of RRBs in the country was Rs. 339.6 thousand crores by the end of March 2021. During the 15-year period of 2007-21, there is a 7-fold increase in the outstanding credit of RRBs. There has been an increasing trend in the value of ‘Outstanding Credit’, but the growth has not been consistent. During the 2013-2018 period, there is a sustained fall in the growth rate except for 2016. 

The growth rate was least in 2018 with only a 4.1% increase in the ‘Outstanding Credit’ by the end of March 2018. However, it was followed by a year of higher growth rate with 19.2% by the end of March 2019. The year prior to the onset of COVID-19, experienced a lower growth rate of 5.8% in the ‘Outstanding Credit’ of RRBs. The ‘Outstanding Credit’ by the end of the pandemic year of 2020-21, has increased by 12%. 

UP, AP & Karnataka have the highest share of Outstanding credit of RRBs 

Maharashtra, which has been among the leading states for ‘Outstanding Credit’ of SCBs, accounts for a lower volume of outstanding credit of RRBs. Over the years, Uttar Pradesh has had the highest outstanding credit of RRBs. By the end of March 2021, the total outstanding credit of RRBs in UP was around Rs. 57.6 thousand crores, which constitutes around 17% of the total outstanding credit of RRBs in the country. The lower growth rate in 2019-20 at the national level is in part contributed by the lower growth rate in ‘Outstanding Credit’ of RRBs in UP. 

Another state which contributed to the slowdown witnessed in 2019-20 in Karnataka, which has the third-highest ‘Outstanding Credit’ of RRBs. Andhra Pradesh is another state which traditionally has a higher ‘Outstanding Credit’ of RRBs. Even after the bifurcation of the state in 2014, both the states of AP & Telangana are among the top-5 in terms of the ‘Outstanding Credit’ of RRBs.

Along with Rajasthan, these top 5 states account for more than half of the total outstanding credit of RRBs by the end of March 2021. As in the case of SCBs, the remaining two southern states of Kerala & Tamil Nadu are among the top-10 states. Data clearly indicates that the southern states have better & greater access to credit both from SCBs as well as RRBs. 

In the cases of RRBs, the Northern, Central & Eastern regions account for higher ‘Outstanding Credit’ compared to the Western region. Which wasn’t the case for SCBs. The ‘Outstanding Credit’ of RRBs in the Northeast has increased by near 10-fold but the volume is much lower than in other regions. 

Huge regional disparities both in the case of SCBs & RRBs 

As highlighted earlier, across both SCBs & RRBs, the five southern states are among the top states with the highest ‘Outstanding Credit’. In other words, this also means they have higher access to credit.  The Western region, particularly the states of Maharashtra & Gujarat also have a higher outstanding credit of SCBs compared to RRBs. 

On the other hand, UP & Bihar are among the states that have higher ‘Outstanding Credit’ of RRBs while they do not figure on the top in terms of ‘Outstanding Credit’ of SCBs. Data also indicates that there has been no major shift in the regional & state-wise positions even during the COVID-19. 

Featured Image: RBI Handbook of Statistics on Indian States

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