Credit growth to services sector slows YoY to two-year low in Jun
This story was originally published at 23:17 IST on 31 July 2024
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NEW DELHI – Bank loans to the services sector rose 15.1% on year to 47.07 trln rupees as of Jun 28, showed data from the Reserve Bank of India released today. This was lower than the 21.2% growth reported a year ago, and the slowest annual increase in credit to the sector since June 2022.
Credit growth to non-banking financial companies – which make up a third of service-sector loans – slumped to 8.5% this year from 34.7% a year ago. The data showed that growth in loans to trade, professional services and aviation also slowed. For aviation in particular, which makes up about 10% of service-sector loans, the growth rate slumped to 9.1% on year from a supernormal 89.8% increase until June 2023.
Personal loans growth also slowed to 16.6% as of Jun 28, from 21.3% a year ago, primarily due to decelerated growth in other personal loans. The slower growth in credit to non-banking financial companies and personal loans is because the RBI in November increased risk weights on personal loans of banks and non-banking finance companies and that of bank exposure to non-bank finance companies.
On the other hand, credit to housing, both for retail customers and to the industry, boomed. Loans to housing, including priority sector housing, rose 18.2% to 24.27 trln rupees as of Jun 28. This comprises the largest segment among personal loans. Loans to commercial real estate, within the services segments, increased 22.8% on year to 4.22 trln rupees as of the last reporting Friday in June.
Separately, loans to agriculture and allied activities also slowed to 17.4% on year in June from 19.7% a year ago.
"On a year-on-year basis, non-food bank credit registered a growth of 13.9% in June 2024 as compared with 16.3% a year ago due to unfavourable base effect," the RBI said. The data nets out the impact of Housing Development Finance Corp's merger into HDFC Bank Ltd last July.
Credit growth to industry grew 7.7% on year in June against 7.4% a year ago. Among major industries, loan growth to chemical and chemical products, food processing and infrastructure rose in June from the same period a year ago. However, the growth of credit to basic metal and metal products, textiles and petroleum, coal products and nuclear fuels, shrank, the RBI said. End
Reported by Aaryan Khanna
Edited by Tanima Banerjee
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