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The poor bring more business to banks in April

Loans to the economically weaker sections in April was nearly 40% higher than loans to big corporates, indicating low credit demand for investments while also pointing to the need for borrowings to keep the poor going at a time when economic activities came to a virtual standstill.

, ET Bureau|
Last Updated: Jun 02, 2020, 07.22 AM IST
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Mumbai: Loans to the economically weaker sections in April was nearly 40% higher than loans to big corporates, indicating low credit demand for investments while also pointing to the need for borrowings to keep the poor going at a time when economic activities came to a virtual standstill. Even as overall bank credit contracted by Rs 1.1 lakh crore in April, many segments such as loans to weaker sections, large corporates, NBFCs and retail trade were in the positive territory.

But significantly, loans to weaker sections under 'priority sector' at Rs 12,381 crore were 40% higher than loans to large corporates at Rs 8,846 crore, according to the data released by the Reserve Bank of India on sectoral deployment of bank credit. A bulk of the increase in such loans could be due to the relief package announced by the government in March.

Among the various measures under the package, finance minister Nirmala Sitharaman announced an increase in loans from Rs 10 lakh to Rs 20 lakh to 63 lakh self-help groups (SHGs) under the National Livelihood Mission. Self-help groups qualify as a 'weaker section' according to the Reserve Bank of India definition. Besides, women beneficiaries up to Rs 1 lakh per borrower and overdraft of upto Rs 10,000 per account for PM Jan Dhan Yojana account holders and small and marginal farmers among others, also qualify as 'weaker sections'.

There is a likely pick up in loan demand under these heads as a loss of livelihood due to the lockdown is likely to have pushed them to resort to borrowings. Even as economic activity had come to a standstill in April after a nationwide lockdown was announced, some industries like power and petroleum did borrow to meet working capital needs.
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