Bank retail credit at ₹50 trillion is not an economic achievement

livemint.com:

₹50 trillion for the first time. As of 30 November, it stood at ₹50.6 trillion. Retail lending comprises housing and vehicle loans, credit card receivables, loans against gold jewellery, personal loans, etc.

In fact, retail lending now constitutes around 32.5% of the non-food credit (by economic activity) given by banks. Banks give loans to Food Corporation of India and other state procurement agencies to buy rice and wheat directly from farmers. This is referred to as food credit.

When these loans are subtracted from overall bank lending, what remains is non-food credit. About a decade ago, as of March 2013, bank loans to industry stood at 45.8% of non-food credit, a proportion that has shrunk to 23.1% as of November. During the same period, the proportion of retail lending jumped from 18.4% to 32.5%.

There is an immediate reason. As of March 2023, retail lending by banks had stood at 29.9% of non-food credit. A significant portion of the jump since then has happened because the home loan lender HDFC merged with HDFC Bank on 1 July 2023.

The entire home loan portfolio of HDFC now comes under the ambit of banks. Then there are long-term reasons. Indian banks, in particular public sector banks (PSBs), had gone overboard extending loans to industry.

In March 2008, loans to industry stood at 38.9% of non-food credit, growing to 45.8% by March 2013. Corporates defaulted on a lot of these loans, especially loans taken from PSBs, changing the structure of Indian banking in the process. First, the ability of many PSBs to continue lending came down, particularly after 2015 when the Reserve Bank of India (RBI) insisted that banks start cleaning up their balance sheets, instead of continuing to kick the can of bad loans down the