The credit limit in Agriculture has not contributed to the decrease for the year 2014. As we can see that though credit limit decreased in Indirect Finance, it increased in Direct Finance.
Also, there was a sudden rise for the year 2013, which was continued in the subsequent years.
The industry includes Mining & Quarrying, transport operations, food industry, professional and other services like recreational activities, IT and tele communications and many more.
There was a drastic decrease in the credit limit from 2013 to 2014. It reduced by approximately 40 %. The drastic fall in 2012 was discontinued with. The credit limit for 2014 was decreased beyond the levels of 2012. It was increased again …show more content…
It has been in the decreasing trend from 2012 to 2015.
• Recreational services
Though there was a decrease of approx. 28 % in recreational services’ credit limit, the overall percentage of credit limit for recreational services was very less. Hence, it’s contribution in the overall shift in the limit can be neglected.
• IT and Telecommunication
The IT industry has been consistent apart from the year 2011. Just for the year 2011 there was a sudden surge of credit limit. The other years in the time period are consistent. Also the overall contribution of credit limit in IT sector is low, hence can be neglected.
• Personal Loans
The banks give personal loan for housing, vehicles, education, personal credit cards, consumer durables and others. Among that credit limit for housing loans contributed nearly 49% for 2014 and nearly 66% for 2013.
The housing loans are in the decreasing trend from 2010 to 2014. There was a gradual change for 2012. But the loans decreased by more than 50% for 2014.
The credit limit also decreased for 2014. In fact, it has been in the decreasing trend from …show more content…
The credit limit show inverted U shape when drawn against change in interest rate.
2. With growing economy, the banks have been increasing the credit limit. In particular, there was a downward shift for the year 2014.
3. Among different industries, agriculture has shown consistency.
4. There was a downward shift of around 40% for the “Industry” which includes Mining, Professional services, Food industry, Textiles and others.
5. In particular, in the industry, Mining had a downward shift of around 35%.
6. Though Tourism, Hotel & Restaurants had a downward shift of 82%, the overall contribution of it the CL is low.
7. Credit limit in Trade is consistent.
8. Finance has 60% decrement in CL for 2014.
The analysis supports the study by Manfred Zeller. This study suggested that if the banks raise interest rates, they will attract riskier projects and obtain more risky loan portfolios with adverse effects. The banks avoid this by keeping a limit on credit they lend. It is important for banks to diversify their loans. They diversify by lending to different industries. This credit rationing approach helps banks to mitigate the risks of segment or sector