Growth in Banks’ Non-Food Credit Slows Down to 19% in April; Sharp Decline in NBFC Loan Growth to About 15%

In April, the year-on-year growth of banks’ non-food credit slowed to 19.1%, reaching Rs 164.76 trillion, a slight decrease from the 20.2% growth observed the previous month, according to the RBI’s latest credit deployment data. When not considering the HDFC merger, the credit uptake increased by 15.3%.

Credit provided by banks to agriculture and related sectors rose nearly 20% year-on-year to Rs 21.14 trillion in December, surpassing the 17% increase seen in the same period the previous year. Industry sector loans saw a 7.4% year-on-year increase to Rs 36.57 trillion, with large corporations receiving a 5% increase in credit to Rs 26.14 trillion.

Service sector loans to NBFCs experienced a near 15% increase to Rs 15.54 trillion, which is significantly less than the 29% growth recorded last year. This reduction in growth rate follows the RBI’s decision last November to increase the risk weights for bank loans to NBFCs by 25% above the risk weight for the applicable external rating when it was below 100%.

Despite the RBI also raising the risk weight for unsecured consumer credit, banks’ personal loan growth was robust at 27% year-on-year to Rs 53.62 trillion, outpacing the 19% growth in the same period the previous year. Within this category, credit card outstanding loans grew by 23% year-on-year to Rs 2.59 trillion.

Overall, Indian banks’ credit expanded by 16.3% year-on-year in FY24, driven by demand in the retail and services sectors, marking an increase from the 15% growth in FY23, as reported in the RBI’s annual report for FY24.

Private sector banks outperformed public sector banks in credit growth during the last fiscal year. Private sector banks’ growth surged to 19.2% year-on-year as of March 22, 2024, up from 17.8% the previous year, while public sector banks’ growth increased to 14.7% from 13.8%. Consequently, public sector banks saw a decrease in their share of total credit, although they still hold a larger portion.

According to a recent note by Crisil, banks’ credit growth is expected to moderate by 200 basis points in the current financial year, with a projected growth of 14% year-on-year.