 "Banking lending to industry up 42.8% in H1FY25; credit to NBFC shrinks")
Reflecting buoyancy and growth momentum, bank credit to industry – small, medium and large – grew by 42.85 per cent in the first half of the current financial year (H1FY25) over the same period last year.
Reserve Bank of India (RBI) data showed that in absolute terms, banks lent Rs 1.5 trillion in H1FY25 as against Rs 1.05 trillion in H1FY24. The outstanding credit to industry stood at Rs 37.86 trillion in September 2024. This data excludes the merger of HDFC with HDFC Bank.
Outstanding bank loans to large enterprises, which have a lion's share in credit, stood at Rs 27.16 trillion. Credit growth to industry improved to 9.1 per cent year-on-year (Y-o-Y) in September 2024 compared to 6.0 per cent a year ago, the RBI said in a statement.
According to RBI forward looking surveys, the optimism in the manufacturing sector for Q3FY25 improved over the previous round. Cost of financing and salary outgo are likely to rise. Pressures from raw material cost are expected to ease, and selling price growth momentum may continue. Services and infrastructure companies continue to maintain a highly optimistic outlook for Q3FY25.
The investment outlook is supported by resilient non-food bank credit growth, elevated capacity utilisation, and healthy balance sheets of banks and corporates. This is also backed by the government’s continued thrust on infrastructure spending, the RBI said in its October monetary policy review.
The central bank said retail loan growth moderated to 16.4 per cent in September 2024 as compared to 18.2 per cent a year ago. This slowdown was largely due to the decline in growth in personal loans to 12.1 per cent from 23.6 per cent in the same period last year. The vehicle loans segment showed moderation in growth to 13.3 per cent Y-o-Y from 21.2 per cent, and credit card outstanding to 18.0 per cent from 31.4 per cent. However, housing – the largest constituent of retail loan segment – recorded accelerated growth.
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Credit growth to services sector decelerated to 15.2 per cent in September 2024 from 21.6 per cent a year ago, primarily due to lower growth in credit to non-banking financial companies (NBFCs). The pace of lending to NBFCs slowed to 9.5 per cent in September 2024 from 21.9 per cent a year ago. The outstanding credit to finance companies shrunk to Rs 15.29 trillion in September from Rs 15.48 trillion, the RBI data showed. Banks have turned cautious in lending to NBFCs after the regulator flagged concerns on fast pace of growth in credit and hiked the risks weight for NBFCs loan exposures in November 2023.
Credit to agriculture and allied activities continued to be robust, with growth of 16.4 per cent in September 2024, compared to 16.7 per cent in the same month last year.