New Delhi, Oct. 27 -- The Reserve Bank of India (RBI) is right to worry about both a slowdown in credit growth and weak animal spirits in the domestic market, represented by a marked reluctance to stump up risk capital. Latest RBI data reflects that anxiety: year-on-year non-food credit grew only 11.2% as of 3 October.

The broader trend looks even more worrying. Sector-wise central bank data on gross bank credit deployment shows that in the year till 22 August, loans to industry had risen by only 6.5%, in contrast with 10.6% to services and 11.8% to retail borrowers. In response, RBI has tweaked its banking rules to nudge credit growth to a higher plane.

As promised earlier, it has issued guidelines that relax its regulation of bank-fun...