Mumbai: The lending pattern of banks had seen a few changes in FY24.
Lending to large companies that shrank during the Covid period recovered in the last fiscal year. The Reserve Bank of India stepped in to improve the quality of retail lending, asking lenders to assign higher risk weights to unsecured lending. While this slowed down growth in such loans, it helped improve the loan books of banks.
Amid this, without factoring in the merger impact of HDFC and HDFC Bank, loans to the services sector grew faster at 20.2% than retail at 17.7% in the year ended March 31, 2024, according to the latest RBI data on sectoral deployment of bank credit. If the HDFC merger impact is considered, retail loans continued to lead the pack with 27.6% growth, followed by services at 22.9%.
The RBI, in November 2023, increased the risk weights on unsecured consumer loans and credit cards by 25 percentage points to 125-150%. As a result, growth in unsecured loans slowed to 20.8% in FY24 compared with 26.7% the previous year.
Overall, excluding the HDFC merge impact, growth in non-food bank credit in FY24 was 16.3%, compared with 15.4% in the previous year, according to RBI data.
Credit to industry grew 8.5% against 5.6% the previous fiscal year. Among major industries, growth in credit to chemicals & chemical products, food processing, and infrastructure accelerated compared with FY23, while that to basic metal & metal products moderated.
Credit growth to agriculture and allied activities was robust at 20.1% against 15.4% as of March 31, 2023.
