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LATEST NEWS UPDATES | Behind rural slowdown: Credit shows uptick, but still trailing in farm sector -Sandeep Singh

Behind rural slowdown: Credit shows uptick, but still trailing in farm sector -Sandeep Singh

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published Published on Jan 21, 2019   modified Modified on Jan 21, 2019
-The Indian Express

Data collated from the Reserve Bank of India over the last five years shows that growth in credit outstanding for the priority sector has traditionally been rising at a much faster rate than the growth in gross bank credit

An uptick in the economy is clear from the improvement in gross bank credit availability but unlike in the past, lending to the priority sector continues to trail, posting single-digit growth rates over the last 18 months. This, possibly, explains the continued sluggishness in growth in rural areas post-demonetisation and implementation of GST.

Data collated from the Reserve Bank of India (RBI) over the last five years shows that growth in credit outstanding for the priority sector has traditionally been rising at a much faster rate than the growth in gross bank credit. But the last 18 months — June 2017 to November 2018 — have been an exception. In fact, in November 2018, bank credit outstanding to the priority sector rose 8.4 per cent, much slower than the gross bank credit growth of 13.6 per cent.

Priority sector refers to segments such as agriculture and allied activities, micro and small enterprises, housing for poor, students’ education and other low-income groups and weaker sections, for which the RBI requires banks to set aside 40 per cent of their lending. This is meant to ensure overall development of the economy.

Even within the priority sector, while the growth rate of credit outstanding has clawed back to over 8 per cent, that for agriculture and allied activities continues to be well below the double-digit growth rates clocked pre-demonetisation.

Much of the recovery in priority sector lending has been a result of a sharp rise in lending to the services category in the micro and small enterprises segment.

In the last 18 months, growth in priority sector credit varied between a low of 3.3 per cent in July 2017 and a high of 9.3 per cent in October 2018. During the same period, the gross bank credit registered the lowest rate of 4.4 per cent in June 2017 and the highest of 13.6 per cent in November 2018.

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The Indian Express, 21 January, 2019, https://indianexpress.com/article/business/economy/rural-slowdownfarm-distress-rbi-msme-5547582/


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