Credit disbursal picks up with higher economic growth: NCAER

High growth rates in economic development is leading to acceleration in the lending of the productive sectors, economic think tank NCAER said.

There has been remarkable change in the pattern of credit disbursal in the last two years. There has been rapid increase in bank credit to the commercial sector while the net bank credit to the government has decelerated, NCAER said in its monthly report Macro Track.

Bank credit to the commercial sector has increased by more than 25 per cent in 2004-05 as well as the following year, it said.

Similarly, non-food credit registered a growth of more than 30 per cent during 2004-05 and 2005-06. The industry during 2005-06 posted an increase of 30.14 per cent in terms of credit demand, the report said.

Among industry credit the infrastructure sector comprising power, transport and telecommunication accounted for about 20 per cent at the end of 2005-06.

Commenting on the growth in credit disbursal, it said, an implication of the high correlation between the growth in bank credit and the output of the real sector growth is an enabling condition for economic growth.

It is, therefore, important that credit should be made available in the sector where growth is necessary, especially for the long term needs of the economy, it said.

The report also noted that all the incremental non-food credit does not necessarily finance production directly.

The growth in consumer credit and credit for housing purposes, for example, stimulates demand for the output of various sectors.

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