Bank credit growth to agriculture and services sector at more than 20 per cent year-on-year, in March 2024, surpassed loans to industry which grew by 8.5 per cent yoy in the month under observation. On a yoy basis, non-food bank credit registered a growth of 16.3 per cent in March 2024, as compared with 15.4 per cent a year ago, Reserve Bank of India said on Wednesday.
Credit growth to agriculture and allied activities was robust at 20.1 per cent yoy in March 2024 as compared to 15.4 per cent growth a year ago, according to RBI data on sectoral deployment of bank credit for the month of March 2024, collected from 41 select scheduled commercial banks, accounting for about 95 per cent of the total non-food credit deployed by all scheduled commercial banks.
Credit growth to services sector improved to 20.2 per cent (y-o-y) in March 2024 (from 19.6 per cent a year ago), with higher growth in credit to ‘transport operators’ and ‘commercial real estate’. Credit growth to ‘non-banking financial companies (NBFCs)’ and ‘trade’, however, decelerated in March 2024 as compared with March 2023. The share of the services sector in bank credit increased marginally to 28.3 per cent. Within services, the highest credit growth was recorded by the aviation sector, which grew 56 per cent to Rs 43,246 crore.
Credit to industry grew by 8.5 per cent as compared with 5.6 per cent in March 2023. The pace of credit growth at 7 per cent to large industries more than doubled in FY24 from the 3.1% per cent a year before. As 22 March, 2024, the share of industry in bank credit contracted 23.1 per cent from 24.8 per cent in March 2023. Among major industries, growth in credit yoy to sectors such as chemicals and chemical products, food processing and infrastructure’ accelerated in March 2024 as compared with the corresponding month of the previous year, while that to ‘basic metal and metal products’ moderated.
An ICRA report also points out that incremental non-food bank credit expansion has been robust so far at Rs. 20.9 trillion in FY2024 (till 8 March, 2024, exceeding the year-ago level of Rs 16.8 trillion, aided by the retail and services segments. The rating agency estimates incremental credit at Rs 22.0-22.5 trillion in FY2024 (excluding the impact of the HDFC-HDFC bank merger), implying a yoy growth of 16.1 per cent -16.5 per cent as compared to 15.4 per cent plus in FY2023). This would be the highest-ever credit expansion in any year, far outpacing the Rs 18.2 trillion seen in FY2023.
On the sectoral front, within industry, infrastructure saw loans grow by 6.5 per cent to Rs 12.8 lakh crore. A CRISIL Ratings study of 11 large and listed residential developers, accounting for one third of the residential property sales in the country, indicates that large developers have already strengthened their credit profiles by deleveraging balance sheets via robust sales and collections over the past two fiscals and focussing more on asset light-models (joint ventures and joint development).
Higher collections and sharper focus on asset-light models have enabled deleveraging of balance sheets, which, in turn, supports the credit profiles of developers. “The momentum in demand and robust collections will help developers fund new launches and withstand any downcycles without stressing their credit profiles. Developer’s ability to maintain leverage amid more launches will bear watching,” says Pallavi Singh, Associate Director, CRISIL Ratings.
For FY2025, ICRA projects the incremental credit growth at Rs 19.0-20.5 trillion (including the impact of the HDFC-HDFC bank merger), implying a yoy growth in outstanding credit of 11.7 per cent -12.5 per cent, lower than the growth expected in FY2024 amid muted export demand in certain sectors, impact of higher interest rates as well as the increase in risk weights.