01-Sep-2023
2 mins read
In July 2023, bank credit growth experienced a slight decline, falling to 14.8% compared to 15.1% the previous year. Various elements are behind this subtle shift. Let’s delve into how individual sectors are faring to comprehend the larger picture. Data from the Reserve Bank of India indicates that credit growth in industrial sectors cooled down to 5.2% year-over-year in July 2023, compared to an expansion of 10.5% in July 2022. Meanwhile, growth in personal loans saw a marginal drop, clocking in at 18.4%, compared to 18.7% last year. On a brighter note, the agriculture and services sectors witnessed strong demand for credit.
Credit Growth by Sector (Year-on-Year)
| Sector | Jul-23 | Jul-22 |
| Industry | 5.20% | 10.50% |
| Personal Loans | 18.40% | 18.70% |
| Agriculture | 16.80% | 13.20% |
| Services | 19.40% | 16.70% |
Which Industries Are Feeling the Pinch?
Certain industries like chemicals, food processing, and infrastructure have experienced a decline in credit growth. However, according to the RBI, sectors like basic metal & metal products and textiles have shown an acceleration in credit growth compared to last year.
The Silver Lining: Agriculture and Services
While the overall trend may seem discouraging, agriculture and allied activities have actually improved, rising to 16.8% from 13.2% a year ago. The services sector has also fared well, accelerating to 19.4% from 16.7%, primarily fueled by trade and commercial real estate.
Future Outlook According to CARE Ratings
The outlook remains generally positive. CARE Ratings suggests that credit growth could be in the range of 13.0-13.5% for FY24. They point to economic expansion, increased capital expenditure, the PLI scheme, and a push for retail credit as supportive factors.
Risks and Uncertainties
While the personal loan segment is expected to perform well in FY24, elevated interest rates and global uncertainties could have a negative impact on credit growth, warns CARE Ratings.
Conclusion
Though there’s been a slowdown in bank credit growth, the scenario isn’t universally grim. Sectors like agriculture and services show promising signs, and rating agencies predict a fairly stable future. However, certain industries and the personal loan segment might face challenges ahead, warranting close observation. This downturn in credit growth presents a mixed bag but also opportunities for strategic recalibrations for both banks and borrowers.