bank credit, rbi, demonetisation, india slowdown, economy, urjit patel, pm modi
RBI headquarters in Mumbai, February 2, 2016.Reuters file

Banks witnessed a surge in deposits after the decision to demonetise Rs 500 and Rs 1,000 notes was taken, but the uncertainty and slump in demand led to a situation where there were few takers for bank loans. The news came even as Finance Minister Arun Jaitley was claiming that all was well with the economy after Prime Minister Narendra Modi's November 8 decision.

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"On a year-on-year (y-o-y) basis, non-food bank credit increased by 4.8 per cent in November 2016 as compared with an increase of 8.8 per cent in November 2015.

"Credit to industry contracted by 3.4 per cent in November 2016 in contrast with an increase of 5.0 per cent in November 2015. Major sub-sectors which witnessed deceleration/contraction in credit include infrastructure, food processing, chemical and chemical products, all engineering, textiles and basic metal and metal products," the Reserve Bank of India (RBI) said in an update on Friday.

The data was based on sectoral deployment of bank credit obtained monthly from 46 scheduled commercial banks that account for about 95 percent of the total non-food credit, the apex bank said.

Jaitley cited the rise in tax collections to claim that critics were wrong on the adverse impact of demonetisation on the economy.

"The indirect tax figures are also available and not withstanding what the critics had predicted in all the categories till November 30 there is a significant increase in indirect taxation. In the central indirect taxes, the increase is 26.2 per cent till 30th November. And this includes excise duties increasing by 43.5 per cent, service tax increasing by 25.7 per cent and customs duties by 5.6 per cent," he had said on Thursday.

The RBI data showed that bank loans registered higher growth in the non-industrial segments.

"Credit to the services sector increased by 7.1 per cent in November 2016 as compared with an increase of 6.8 per cent in November 2015. Personal loans increased by 15.2 per cent in November 2016 as compared with an increase of 18.0 per cent in November 2015."

Jaitley had claimed increase in foreign tourist arrivals, insurance premia, domestic air traffic, mutual funds (11 percent increase) in November to counter that the "surgical strike" on black money was a major disruptor.