Pace of bank lending to infrastructure shrinks to 2.3%: RBI data

Bankers say private infra offtake slow; much of funding is via public funds

Growth in bank lending to infrastructure slowed sharply to 2.3 per cent year-on-year (YoY) in January this year against 10.7 per cent a year ago, Reserve Bank of India data showed.

This moderation has come at a time when capital expenditure on various segments of infrastructure is rising.

In absolute terms, bank lending to infrastructure grew by just Rs 26,838 crore in the 12 months to January 2023 as against more than Rs 1.11 trillion in the preceding 12 months (till January 2022).

Outstanding bank credit to infrastructure stood at more than Rs 1.18 trillion in January 2023. Bankers said this moderation was not indicative of any adverse turn. Much of infrastructure spending is happening through public funds under various schemes of the Central and state governments.

For example, in Union Budget 2023-24, the capital investment outlay has been increased steeply for the third year in a row, this time by 33 per cent, to Rs 10 trillion, which would be 3.3 per cent of gross domestic product (GDP). This will be almost three times the outlay in 2019-20.

The offtake of bank credit by the private sector for infrastructure projects has been slow. Also, the completed projects in roads and energy have moved to infrastructure investment trusts (InVIT) which have repaid loans, reducing the amounts. Loans are being refinanced by infrastructure debt funds and debentures, a market instrument. J Swaminathan, managing director, SBI, said the bank was experiencing moderation but it was not a concern yet.

“The pipeline (like sanctioned credit) remains as it is. This (slowdown) could be temporary. The third quarter itself was a little subdued. This quarter too is subdued for infrastructure and industry in terms of disbursements and utilisation. This moderation is in tune with overall indicators.”

“There could be small delays. Supply-chain delays are also impacting infrastructure projects. Disbursements happen based on progress on the ground (of projects),” he added. The segmental flow of credit showed growth in lending to the power sector slowed to 2.8 per cent YoY in January from 4.2 per cent in January 2022.

The dip in growth was substantial in roads from 25.9 per cent YoY in January 2022 to 8.7 per cent in January 2023.

The telecom sector saw a shift from 33.1 per cent growth YoY to a decline of 12.8 per cent.