Non-food credit growth of the banking system slowed down in December, mainly due to a sharp decline in loans to industry. Credit to industry, which was growing at a healthy pace of over 10% since July, moderated to 8.7% in December.
Overall credit growth in the non-food credit of banks stood at 15.3% in December compared to 17.6% in the previous month. The credit growth came off the high of 18.3% in October. Total credit outstanding to industry was close to `33 trillion, while overall non-food credit stood at `132.5 trillion as of December 30, data from the Reserve Bank of India (RBI) shows.
Despite a moderation in loans to industry, overall credit growth was supported by the personal loan segment and credit to non-banking finance companies (NBFC). Personal loan growth was at 20.2% during the month, led by home loans and vehicle finance. Credit to the NBFC sector grew 36% in December.
Loan growth to large industries stood at 7%, while credit to medium industries grew 15.4% in December. Credit growth in the micro and small industry segment was 13.7% during the month.
The share of MSMEs in industrial credit increased to 23.7% in the post-pandemic period from 17.7% due to policy focus on MSME lending, the RBI said in its monthly bulletin. Around 12% of the outstanding MSME credit was prevented from slipping into bad assets because of the Emergency Credit Line Guarantee Scheme (ECLGS), according to analysis by the economics wing of State Bank of India.
Sectorally, loans to the infrastructure segment, which were driving the growth in loans to industry, were sharply lower in December at 5.3%, against 10.5% a month ago.
Most of the bellwether companies such as Reliance Industries, JSW Steel and Ultratech Cement showed a decline in profits for Q3FY23, while margins of FMCG and discretionary product companies were under pressure on account of lower demand in the post-festive season.
Despite that, rising capacity utilisation and investment in manufacturing has created optimism regarding future demand, as per the Economic Survey 2022-23, released on Tuesday. The government has put in place a planned infrastructure push through Gati Shakti and National Infrastructure Pipeline, coupled with private capex, which has all pre-conditions lined up to step up and do the heavy lifting, the survey said.