Banking News

NBFCs loans: Bank loans to NBFCs moderate in November

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Credit growth in November was led by loan growth in services sector despite a slowdown in lending to NBFCs which comprised a significant portion of services loan portfolio.

Credit to services sector grew by 21.9 per cent on a year-on-year (y-o-y) basis in November 2023 as compared with 21.3 per cent a year ago according to the latest data released by the Reserve Bank of India. The growth surge despite credit growth (y-o-y) to ‘non-banking financial companies (NBFCs)’ tapering down to 21.5 percent in November 2023 from 32.4 percent a year ago. In November this year the Reserve Bank not only increased the risk weights on bank lending to NBFCs, but also the risk weights on their unsecured lending.

Overall non-food bank credit rose 16.3 percent y-o-y in November 2023 as compared with 17.6 percent a year ago. “Bank credit growth has sustained its momentum during 2023-24 so far, albeit with some moderation in public sector banks (PSBs) and foreign banks (FBs). Lending to services and personal loans grew faster than to industrial and agriculture sectors” the latest financial stability report said

Retail loans growth decelerated to 18.6 percent (y-o-y) in November 2023 (19.9 percent a year ago), due to moderation in credit growth to housing.” Personal ( retail) loans recorded broad-based growth. In private sector banks, education loans emerged as a new lending area, coming from a low base” the Financial Stability Report said

Credit to industry rose by 6.1 per cent (y-o-y) in November 2023 as compared with 13.0 per cent in November 2022. Among major industries, credit growth (y-o-y) to ‘basic metal & metal products’, ‘food processing’ and ‘textiles’ accelerated in November 2023 as compared with the corresponding month of the previous year, while that to ‘all engineering’, ‘chemicals & chemical products’ and ‘infrastructure’ decelerated.

Credit growth to agriculture and allied activities accelerated to 18.2 percent (y-o-y) in November 2023 from 14 percent a year ago.

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