Credit growth moderated in October as lending to all major sectors including retail, industry and loans to services slowed down as also due to the merger impact of HDFC with HDFC Bank.
On a year-on-year (y-o-y) basis, non-food bank credit rose 15.3 per cent in October 2023 compared with 18.3 per cent a year ago according to the latest data on sectoral deployment of bank credit was released by the Reserve Bank of India largely due to the merger impact of HDFc with HDFC Bank. Excluding the merger impact, credit offtake is higher 19.8 percent in October this year.
Credit to the services sector grew 20.1 percent y-o-y compared with 22.5 per cent a year on the back of a surge in loans to ‘non-banking financial companies (NBFCs)’ and ‘trade’. “ It would be interesting to see if this is sustained for NBFCs given the recent capital norms brought in. As funds are raw material for their business it is unlikely that there would be a slowdown even in case interest rates rise” said Madan Sabnavis, chief economist at Bank of Baroda.
Retail loans decelerated to 18.0 per cent (y-o-y) in October 2023 against to 20.5 per cent a year ago due to moderation in credit growth to housing. Reatil loans have a share of 32% followed by services with 29% and industry with 25%.
Credit to industry grew by 5.4 per cent (y-o-y) in October 2023 as compared with 13.5 per cent in October 2022. Large manufacturing is still the laggard with growth of just 2.8%.
Among major industries, credit growth (y-o-y) to ‘basic metal & metal products’, ‘food processing’ and ‘textiles’ accelerated in October 2023 as compared with the corresponding month of the previous year, while that to ‘all engineering’, ‘chemicals and chemical products’ and ‘infrastructure’ decelerated.
Credit growth to agriculture and allied activities improved to 17.5 per cent (y-o-y) in October 2023 from 13.8 per cent a year ago.
