Credit on every Indian doubles in 7 years; Government credit incentives are bearing fruit

The average borrowing of every Indian has doubled in the past seven years. Per capita bank credit was 37,802 rupees in FY12, which has increased to 73,637 rupees in fiscal 2019. Various measures have recently been taken to improve credit growth in the country, including a partial loan guarantee program from PSU banks, one-off restructuring programs, external benchmarking, etc., added the minister. There is also an additional deduction for loan interest house purchases of up to Rs 45 lakh are allowed and measures have been taken to incentivize loans to specific productive sectors, he added.

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While the increased per capita bank credit has given banks the opportunity to expand their business, it has also put the banking sector at risk from NPAs. The main reasons for the surge in stressed assets are loud aggressive lending practices, willful defaults, credit fraud, corruption and economic slowdown RBI. The Asset Quality Review (AQR) initiated in 2015 for adjusted and fully provisioned bank balance sheets revealed a high incidence of non-performing assets (NPAs).

Meanwhile, the aggregate gross loans of all banks had almost tripled from Rs 23.44 lakh crores in FY08 to Rs 65.76 lakh crores in FY14, according to RBI global operations data. Now, however, the situation of NPAs is gradually improving as gross NPAs of public and private sector banks fell by Rs 89.572 billion through December 2019, after peaking in the previous fiscal year and first three quarters at the end of March 2018 of the current financial year.