Bank credit growth in India has remained anaemic for the past few years. Indeed, credit growth has been slower than nominal GDP growth in five out of the preceding seven years. This is a break from the past when credit growth has historically almost always been faster than nominal GDP growth. For example, in the preceding decade (FY05-15), Bank credit had grown at 22% Cagr while Nominal GDP had expanded by 15% Cagr. The standard metric to analyse why credit growth has been this anaemic is to splice the data across sectors – Agriculture, Industry, Services etc.

But a more interesting analysis is to splice data by the borrowing entity. And the short answer to why credit growth has been weak is that the corporate sector in India has refrained from borrowing even as other entities have continued to borrow.

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