A favourable development during 2002-03 has been a sustained increase in credit flow to the commercial sector reflecting industrial recovery, the central bank said on Tuesday.

"During 2002-03, non-food credit of scheduled commercial banks registered a high growth of 26.2 per cent and, net of mergers, it rose by 17.8 per cent as against an increase of 13.6 per cent in the previous year.

"The incremental non-food credit-deposit ratio during 2002-03 at 79 per cent is the highest recorded over the last five years. This is indicative of the fact that a substantial part of lendable resources of banks has been deployed for productive purposes," the statement said.

"This is also borne out by the strong growth of 10.3 per cent in demand deposits in 2002-03, which is mainly used for working capital requirements. The increase in total flow of funds from SCBs to the commercial sector during 2002-03, including banks' investments in bonds/debentures/shares of public sector undertakings and private corporate sector, commercial paper, was also higher at 24.5 per cent as against 12.7 per cent in the previous year.

"The total flow of resources to the commercial sector, including capital issues, global depository receipts  and borrowings from financial institutions was at Rs 1,88,262 crore (Rs 1882.62 billion) as compared with Rs.1,42,082 crore (Rs 1420.82 billion) in the previous year," the statement said.

The release went to add that, "Feedback on industry-wise credit flows received from banks for 2002-03 (April-February) reveals that, at a disaggregated level, there was significant increase in credit to iron & steel, metal & metal products, cotton& jute textiles, electricity, paper & paper products, fertilisers, drugs & pharmaceuticals, cement, gems & jewellery, construction, food processing, computer software, power and roads & ports.

"On the other hand, decline in credit was observed in coal, engineering, sugar, tobacco & tobacco products, telecommunications and petroleum."