Banks share in credit to commercial sector rises to 59% in FY23 against 46% in FY22
The total flow of resources to the commercial sector in India experienced a significant 31% year-on-year (YoY) surge during the fiscal year 2022-23 (FY23), with banks’ share in this flow increasing substantially to 59%. This surge marked a notable upswing from the 46% recorded in FY22, according to the Reserve Bank of India’s (RBI) Handbook of Statistics on the Indian Economy 2022-23.
In absolute terms, the total resources directed towards the commercial sector amounted to Rs 29,49,176 crore in FY23, a substantial increase from the Rs 22,51,703 crore registered in FY22.
In the current financial year, up to July 28, there has been a significant uptick in bank credit growth, amounting to Rs 7.5 lakh crore compared to Rs 5.7 lakh crore during the same period the previous year, marking a substantial 31.57% YoY increase.
During FY23, the resource inflow from banks to the commercial sector reached Rs 17,51,417 crore, marking a substantial increase from Rs 10,44,088 crore recorded in FY22. Conversely, the flow of resources from non-banks to the commercial sector in FY23 amounted to Rs 11,97,759 crore, slightly lower than the Rs 12,07,615 crore seen in FY22.
NBFCs see a jump too
Within the non-banking category, resources directed towards the commercial sector from domestic sources witnessed a significant increase, accounting for 70% of the total (compared to 48% in FY22). In contrast, resources originating from foreign sources experienced a sharp decline, making up 30% of the total (down from 52% in FY22).
The notable shift in the flow of resources towards the commercial sector in FY23, with banks overtaking non-banking entities, can be attributed to various factors including the firming up of money market rates in alignment with the policy repo rate increase, diminishing liquidity, and tighter global financial conditions.
The growth in bank credit reflects several factors, including fluctuations in economic activity, the availability and cost of non-bank funding, the relative cost of bank funding, the health of the banking sector, and its risk appetite. Bank credit growth in 2022-23 was largely driven by a cyclical rebound following the subdued performance in the pre-pandemic year of 2019-20 and during the pandemic phases of 2020-21 and 2021-22.
