A recent report by the State Bank of India (SBI) reveals significant slowdown in credit growth across all sectors, with momentum turning negative. The report indicates a sharp decline in both incremental credit and deposits compared to the previous year, pointing to a challenging environment for the banking sector’s growth.
Looking forward, the report forecasts that credit and deposit growth will stabilize within the range of 11-12% for FY25. It also stressed the importance of refining credit outreach strategies to address regional disparities and optimize growth across sectors.
According to the report, as of November 15, 2024, incremental credit from all scheduled commercial banks (ASCBs) grew by Rs 9.3 lakh crore, marking a year-to-date (YTD) growth of just 5.3%. This is a considerable drop from last year’s growth of Rs 19.4 lakh crore (YTD 14.2%). Similarly, deposits increased by Rs 13.7 lakh crore (YTD 6.7%) this year, compared to Rs 16.0 lakh crore (YTD 8.9%) during the same period last year.
The report attributes this slowdown to the diminishing favorable base effect and negative momentum in credit growth. It also highlights that credit growth has slowed down across key sectors, including agriculture, industry, services, and personal loans. In particular, credit to housing and consumer durables has sharply declined in absolute terms. While credit disbursement has significantly reduced for most industries, sectors like chemicals, construction, and rubber/plastic/paper products have experienced some resilience.
“Slowdown is evident in all Agri & Allied sectors, Industry, Services, and Personal loans (vis-a-vis last year), while credit to housing and consumer durables credit has nosedived in value terms,” the report stated.
The report also pointed to a shift in the demographic distribution of credit, with metro cities continuing to dominate the share of bank credit, holding 60.6%. Urban areas follow at 17.9%, semi-urban areas at 13.8%, and rural branches at 7.7%. There is a growing call to increase the share of rural and semi-urban areas in credit distribution to ensure a more balanced approach across region.
(With ANI inputs)