Punching holes in the government’s narrative on the success of the loan mela or outreach programme, data released by the Reserve Bank of India (RBI) on Thursday showed that outstanding non-food credit grew a meagre 0.22% between 27 September and 11 October.
The loan mela was conducted by banks during 1-9 October across 250 districts to meet demand during the festival period. This was part of a series of measures by the government to boost demand, amid concerns of falling GDP growth. The recent loan mela, which was pitched as a solution to improve credit flow to retail borrowers and small enterprises, could hardly make a difference to credit uptake from the preceding fortnight.
According to RBI data, the incremental non-food credit in this period (27 September to 11 October) was ₹21,439.87 crore and the outstanding credit stood at ₹97.28 trillion as on 11 October. On a year-on-year (y-o-y) comparison of the 11 October fortnight with the same period in 2018, non-food credit growth was at 8.72%, a tad higher than the growth reported in the 27 September fortnight. To be sure, RBI said on Thursday that these are provisional number as some banks have not been able to submit final figures.
Non-food credit growth in the fortnight ending 27 September slowed to as low as 8.7% year-on-year to ₹97.11 trillion, central bank data showed.
The finance ministry said on 14 October that banks disbursed ₹81,781 crore loans during the mela, but bankers had told Mint that this includes many loans sanctioned earlier, but disbursed during the mela. However, since RBI’s outstanding bank credit data is net of repayments by borrowers, the absolute number is not comparable with the disbursement data provided by the finance ministry. Mint reported on 20 October citing bankers that early data trends indicate only a minor uptick in credit.
Loan melas have often been used to push credit and increase consumption. Under the latest scheme, 400 districts (250 in phase one and 150 in phase two) in the country were divided among banks where they would lead the initiative. The second phase of the loan mela started on 21 October. While every lender could participate in all of these districts, the specific lead bank was in charge of the overall campaign, logistics and management for those districts.
Typically, a loan mela starts around 9am, in which outdoor stalls are set up by various banks in various locations and are sometimes kept open even till midnight, depending on customer footfalls. Moreover, entertainment programmes were also organized to woo people to the mela.