Overall bank credit rose nearly 21% year-on-year (y-o-y) to Rs 162.1 trillion as on February 23, the latest data on sectoral deployment of credit released by the Reserve Bank of India (RBI) on Thursday showed. Agricultural and allied activities and retail loans drove the growth in credit.
Outstanding loans to agricultural and allied activities rose 20.1% YoY to Rs 20.4 trillion, compared with a 15% growth in February 2023.
Retail loans grew 28.3% to nearly Rs 53 trillion, aided by an increase in credit card outstanding, education loans, ‘other personal loans’ and home loans. In comparison, retail loans rose 21% YoY in February 2023.
In November 2023, the RBI had asked banks to increase risk weights on unsecured retail loans by 25% with the aim to curb exuberance in the segment. Despite this, the share of retail loans in overall bank credit rose to 32.5% from 30.53% a year ago.
Outstanding loans to the services sector grew 24% YoY to Rs 45 trillion, aided by the traction from the aviation sector.
Loans to non-banking financial companies (NBFCs) rose 14.7% to Rs 15.1 trillion, with the RBI asking NBFCs to curb their exposure to bank credit. Loans to NBFCs increased nearly 32% in February 2023.
Loans to industry rose 9.1% to nearly Rs 37 trillion, driven by advances to micro, small and medium-sized enterprises. The share of the MSME segment within overall bank credit fell to around 23% as of February 23 from 25% a year ago.
“Credit offtake continues to be primarily driven by the continued demand for personal loans. The outlook for bank credit offtake remains positive, supported by factors such as economic expansion and a continued push for retail credit,” CareEdge Ratings said in a recent report.