Non-food credit, accounting for 99.8% of the share of the total credit, recorded a growth of 19.1%, YoY, at Rs 16673874 crore as on 14 June 2024 as against a rise of 19.8% fortnight ago and 18.2% rise a year ago. Food credit moved up 28.5% to Rs 36923 crore as on 14 June 2024.

The overall credit-deposit ratio improved on sequential basis to 79.9% as on 14 June 2024 from 79.6% a fortnight ago, while jumped from 75.1% in June 2023 with the faster growth in advances.

Sectoral deployment of bank credit

As per the data on sectoral deployment of bank credit as released by the Reserve Bank of India (RBI), non-food bank credit increased 19.8% in May 2024 over a year ago, showing acceleration in growth compared with 15.5% increase in May 2023. The credit to agriculture accounting for 12.7% of total bank credit, expanded at an improved pace of 21.6% in May 2024 from 16.0% growth in May 2023. Meanwhile, the credit growth to the industry accounting for 22.1% of total bank credit, increased 9.4% in May 2024 compared with 6.0% growth in May 2023. Within the industrial segment, the advances to large industry rose 7.1%, while credit to medium industry moved up 15.5% in May 2024. The credit for the micro and small industry increased 15.5% compared with 9.9% growth in May 2023.

Credit growth to the services sector accounting for 27.9% of total bank credit, has accelerated to 23.2% in May 2024 compared with an increase of 21.3% in May 2023, driven by acceleration in credit growth for commercial real estate at 45.3%, other services 32.3%, professional services 27.8% and wholesale trade (other than food procurement) 18.3%, while credit growth has also improved for transport operators to 23.7%, tourism, hotels and restaurants 14.1%, aviation 46.9% and shipping 5.1%. However, the services credit growth for NBFCs decelerated to 16.0% and retail trade 17.1%, while credit to computer software moved up 5.9% in May 2024.

Personal loans accounting for 32.5% of total bank credit, increased at an accelerated pace of 28.7% in May 2024 as against an increase of 19.1% in May 2023. Among the major segments of personal loans, the credit for housing increased at improved pace of 38.7%, loans against gold jewellery 29.7%, education 24.2%, advances to individuals against share, bonds etc 21.6% and consumer durables 15.0%. However, the credit growth has moderated for other personal loans to 19.3%, advances against fixed deposits 10.1%, vehicle loans 17.9% and credit card outstanding 26.2% in May 2024 from May 2023.

Priority sector loans accounting for 42.8% of total bank credit, increased at an accelerated pace of 21.4% in May 2024 compared with a 11.7% growth in May 2023. Among priority sector loans, the credit growth for micro & small enterprises improved to 19.9% and agriculture & allied activities 22.7%, while credit to housing expanded 22.2% and weaker sections 24.9%.

Industrial credit growth

Credit to the industrial sector accounting for 22.1% of the total banking sector credit increased 10.4% in May 2024 compared with a rise of 6.0% in May 2023.

As per industry-wise classification, the credit growth has accelerated for infrastructure (9.4% from 1.8%), chemicals & chemical products (17.4% from 4.6%), food processing (14.0% from 4.1%) and all engineering (12.2% from 5.2%).

The credit growth has also moved up for textiles (10.6% from 5.3%), other industries (0.8% from -2.0%), vehicles, parts & transport equipment (14.4% from 7.1%), beverage & tobacco (35.1% from 29.1%), construction (10.1% from 8.2%) and rubber, plastic & their products (12.8% from 9.9%).

Further, the credit growth has improved for glass & glassware (57.3% from 34.7%), paper & paper products (10.6% from 5.2%), wood & wood products (21.4% from 21.3%), leather & leather products (6.5% from 2.2%) and gems & jewellery (7.2% from 7.2%), end May 2024 over May 2023.

On the other hand, the credit growth has moderated for petroleum, coal & nuclear fuels (1.9% from 31.0%), mining & quarrying (incl. coal) (0.1% from 17.7%), basic metal & metal product (14.4% from 16.5%) and cement & cement products (10.4% from 12.9%).

Aggregate deposits

Aggregate deposits growth of the scheduled banks was steady on sequential basis at 12.6% YoY to Rs 20902920 crore as on 14 June 2024, compared with 12.7% growth a fortnight ago and dipped from 15.5% rise a year ago. The time deposits of the banks moved up 12.8% at Rs 18512238 crore, while the demand deposits increased 10.7% to Rs 2390682 crore as on 14 June 2024.

Investments of the banking sector

The banks investment in government and other approved securities that qualify for treatment of statutory liquidity ratio increased 10.4% YoY to Rs 6227785 crore as on 14 June 2024, showing acceleration in growth from 10.3% increase a fortnight ago. The banks investment had moved up 16.0% in June 2023.

The investment-deposit ratio improved on sequential basis to 29.8% as on 14 June 2024 from 29.3% a fortnight ago, while improved from 29.6% in June 2023. The investment-deposit ratio is much higher above the Statutory Liquidity Ratio of 18.0%.

Outlook

The banking sector has continued to post a robust earnings show in Q4FY2024 with moderate credit cost and continuous improvement in asset quality. The loan growth is strong across the segments despite a high base. The recovery in the margins and strong non-interest income further boosted the bottomline of the banking sector in Q4FY2024.

There would be steep competition for deposits as the banking sector intents to keep the high credit deposit ratio in check. The repricing of deposits has been almost completed and recovery of the Casa deposit ratio aided an improvement in the NIMs. However, the tight liquidity conditions and elevated credit deposit ratio limiting loan growth may continue to exert pressure on the margins.

The asset quality of the banking sector continued to improve, with low fresh slippages of loans and strong recoveries and write-offs. The fresh slippage of loans is likely to remain under control with stressed loans at a comfortable level. Banks have also built a strong PCR and healthy contingency provision buffers.