Growth in bank credit to NBFCs declines sharply to 6.4%: RBI data

Non-food credit increased at slower clip of 12.8% in October compared to 15.5% a year ago, says RBI

The growth in bank credit to non-banking financial companies (NBFCs) declined sharply to 6.4 per cent in October compared to 18.3 per cent in the year-ago period, dragging down the growth of overall credit to the services sector, according to the Reserve Bank of India’s (RBI’s) sectoral deployment of credit data.

 

Overall growth in credit offtake by the services sector dropped to 14.1 per cent Y-o-Y in October compared to 20.4 per cent, largely due to reduced growth in credit to NBFCs and trade segment.

 

The outstanding bank credit to NBFCs stood at Rs 15.36 trillion in October 2024 compared to Rs 14.44 trillion in the same month last year. It was Rs 15.29 trillion in September 2024 and Rs 15.48 trillion in May this year.

 

 

In its September bulletin, the RBI noted that finance companies have diversified their funding sources and reduced their borrowing from banks after the central bank increased risk weights on bank borrowings. In November 2023, the RBI raised the risk weight on NBFCs by 25 percentage points to pre-empt the build-up of potential risks in these segments.

 

In the services segment, the growth in loans to the trade segment dropped to 12.4 per cent from 20.7 per cent in October 2023. However, the pace of growth in loans for commercial real estate accelerated to 26 per cent Y-o-Y from 14.8 per cent.

 

According to RBI data, the retail credit growth which consists mainly of unsecured credit, fell sharply to 15.8 per cent Y-o-Y in October 2024 from 18.0 per cent, largely due to decline in growth in other personal loans, vehicle loans and credit card outstanding.

 

The pace of growth in credit card outstanding also decreased to 16.9 per cent from 28 per cent during this period. Growth in vehicle loans dropped to 11.4 per cent compared with 20 per cent in the year-ago period.

 

However, credit growth to the largest segment - housing - accelerated to 17.8 per cent Y-o-Y from 14.3 per cent. The credit growth numbers exclude the impact of the merger of HDFC with HDFC Bank.

 

The RBI noted in its statement that non-food credit increased at a slower clip of 12.8 per cent in October compared to 15.5 per cent a year ago. Credit to industry strengthened to 8 per cent in October compared with 4.8 per cent a year ago.

 

Credit to agriculture and allied activities registered a growth of 15.5 per cent in October compared with 17.4 per cent seen in the same month of last year.