Unlike the case of regular commercial banks (BSCs) ‘outstanding credit’ to industry and agriculture, there has been a sharp increase in ‘outstanding credit’ from ‘personal loans’. The ‘outstanding credit’ of SCB personal loans increased from Rs. 12.58 lakh crore by the end of March 2016 to Rs. 28.74 lakh crore by the end of March 2021.
In Part 1 of this series on ‘Outstanding Credit’, we examined trends in regular commercial bank (BSC) outstanding credit across states, based on data provided by the RBI in its Indian States Statistics Handbook. In the first part, we focused specifically on the outstanding credit of SCBs to the agricultural sector and industry.
In the first part of this series, we pointed out that there is a constant increase in the “Outstanding Loans” of personal loans over the years, and even during the pandemic year contrary to the observed trend in “Outstanding Loans”. credit ”from SCBs to Industry. In this story, we examine trends across states and take a more in-depth look at the outstanding credit of regional rural banks (RRBs).
More than 60% of the last “Outstanding credit” of personal loans in the South and West regions
In the previous story, we observed that there are huge variations between regions in terms of the value of “outstanding credit” of SCBs. This variation is more marked in the case of outstanding personal loans.
At the end of March 2021, of the total outstanding ‘personal loan’ of Rs. 28.73 lakh crore, around 36% is from the southern region. Another quarter, or about 25.5% of outstanding loans, comes from the West region. Out of the 6 regions categorized by RBI in its report, these two regions constitute 60% of outstanding personal credit at the end of March 2021.
Then come the regions of the North, the Center and the East. The North East region has the lowest outstanding credit of Rs. 64,000 crore by the end of March 2021, which is roughly 2% of the total outstanding credit.
While the positions have remained the same over the past 15 years (2007-2021), there is variation in growth by region over the years. Particularly since 2017, the “Outstanding Credit” of personal loans in the Southern Region has experienced a significant increase.
5 States represent more than 50% of Outstanding Personal Loans
The imbalance in “Outstanding Credit” observed between regions is also a reflection of the enormous variance between States. The five states in the Southern region, which have the highest personal loan outstanding, are among the top 10 states in terms of personal loan outstanding at the end of March 2021.
- Much of the western region’s “windfall credit” comes from Maharashtra and Gujarat.
- At the end of March 2021, Maharashtra has the highest amount of outstanding credit with Rs. 525,000 crore, or around 18% of total “outstanding loans”. It is greater than the total “credit in progress” in each of the other 4 regions (excluding the south and west).
- The top five states of Maharashtra, Karnataka, Tamil Nadu, Telangana and Gujarat accounted for more than 50% of total “outstanding credit” personal loans at the end of March 2021.
- Unlike the case of agricultural and industrial credit, the “outstanding credit” of personal loans in major states has increased year over year. (The bifurcated states of Andhra Pradesh being an exception in 2015)
- The top five states are also reporting higher growth since 2017, with Maharashtra’s growth in outstanding credit being greater.
Although data on the exact amount of credit extended in each fiscal year is not available, trends in “outstanding credit” serve as an important proxy indicator in estimating the amount of credit extended. The data shows that there have been no major changes in positions in the states regarding “outstanding credit” personal loans. States that traditionally have higher “outstanding credit” continue to do so, and states, particularly in the East and Northeast, report low amounts of “outstanding credit”. In fact, the gap is widening, with major states continuing to report higher amounts of outstanding credit over the years.
While these trends broadly reflect the amount of state economic activity and GSDP, SCBs could do well to ensure a more equitable distribution of credit.
The “outstanding credit” of ORRs was multiplied by 7 between 2007 and 2021
Regional rural banks are regular government-owned commercial banks, the main purpose of which is to provide banking and financial services at the rural level. They mainly provide credit to agriculture and other rural sectors. Some of these banks may also have urban operations.
According to data provided by RBI, the “outstanding credit” of RRBs in the country was Rs. 339.6 thousand crore by the end of March 2021. During the 15-year period 2007-21, the outstanding amount of RRB credit has increased sevenfold. There has been an upward trend in the value of “outstanding credit”, but growth has not been constant. During the period 2013-2018, there is a sustained decline in the growth rate except in 2016.
The growth rate was lowest in 2018 with only a 4.1% increase in “outstanding credit” at the end of March 2018. However, it was followed by a year of higher growth rate with 19 , 2% at the end of March 2019. The year before the onset of COVID-19, saw a slower growth rate of 5.8% in the “outstanding credit” of ORRs. The “outstanding credit” at the end of the 2020-2021 pandemic year has increased by 12%.
UP, AP and Karnataka have the highest share of RRB outstanding credit
Maharashtra, which has been one of the top states for SCB ‘outstanding credit’, accounts for a lower volume of RRB outstanding credit. Over the years, Uttar Pradesh has had the highest RRB outstanding credit. At the end of March 2021, the total outstanding RRB credit in UP was around Rs. 57.6 thousand crore, which is about 17% of the total RRB credit outstanding in the country. The lower growth rate in 2019-2020 at the national level is in part due to the lower growth rate of the “outstanding credit” of RRBs in PU.
Another state that contributed to the slowdown observed in 2019-2020 in Karnataka, which holds the third highest “outstanding credit” of RRBs. Andhra Pradesh is another state that traditionally has a higher RRB “exceptional credit”. Even after the state bifurcation in 2014, the two states of PA and Telangana are among the top 5 in terms of “exceptional credit” of RRBs.
Along with Rajasthan, these top 5 states accounted for more than half of the total RRB loan outstanding at the end of March 2021. As in the case of SCBs, the other two southern states of Kerala and Tamil Nadu are among the top 10. first. States. The data clearly indicates that southern states have better and greater access to credit from both SCBs and RRBs.
In the case of the RRBs, the North, Central and East regions represent a higher “outstanding loan” than the West region. This was not the case for the SCBs. The “exceptional credit” of RRBs in the northeast has increased almost tenfold, but the volume is much lower than in other regions.
Huge regional disparities in both the case of SCBs and RRBs
As noted earlier, across the SCBs and RRBs, the southern five states are among the top states with the highest “outstanding credit”. In other words, it also means that they have better access to credit. The western region, particularly the states of Maharashtra and Gujarat, also have a higher stock of credit from SCBs than RRBs.
On the other hand, the UP and Bihar are among the states that have the highest “outstanding credit” of RRBs while they do not rank first in terms of “outstanding credit” of SCBs. The data also indicates that there has been no major change in regional and national positions, even during COVID-19.
The selected image: RBI Handbook of Indian States Statistics