The year 2023-24 has seen a few changes in the lending pattern of banks. Lending to large corporates recovered after post COVID-19 contraction. The Reserve Bank stepped in to improve lending quality of retail loans which helped banks’ loan books in recent years by assigning higher risk weights to unsecured lending, which helped in slowing the pace of growth of such loans.
In the process, without factoring in the merger impact of HDFC with HDFC Bank, loans to services factor grew faster at 20.2 percent than retail at 17.7 percent in FY’2023-24 according to the latest data on sectoral deployment of bank credit. While retail loans continue to lead the pack with 27.6 percent followed by services at 22.9 percent if one factors in the merger impact of HDFC with HDFC Bank.
The RBI, in November 2023 increased the risk weights on unsecured consumer loans and on credit cards by 25 percentage points to 125-150 per cent. As a result unsecured loans growth slowed down to 20.8 percent compared to 26.7 percent in the same period a year ago.
Overall , excluding the merger impact of HDFC with HDFC Bank, On a year-on-year (y-o-y) basis, non-food bank credit registered a growth of 16.3 per cent in March 20243 as compared with 15.4 per cent a year ago according to the RBI data .
Credit to industry grew by 8.5 per cent (y-o-y) in March 2024 as compared with 5.6 per cent in March 2023, RBI said. Among major industries, growth in credit (y-o-y) to ‘chemicals & chemical products’, ‘food processing’, and ‘infrastructure’ accelerated in March 2024 as compared with the corresponding month of the previous year, while that to ‘basic metal & metal products’ moderated.
Credit growth to agriculture and allied activities was robust at 20.1 per cent (y-o-y) in March 2024 (15.4 per cent a year ago).
