Non-food credit, accounting for 99.7% of the share of the total credit, recorded a growth of 11.4%, YoY, at Rs 17535362 crore as on 13 December 2024 as against a rise of 10.6% fortnight ago and 20.1% rise a year ago.

Food credit moved up 23.1% to Rs 52307 crore as on 13 December 2024. The overall credit-deposit ratio improved on sequential basis to 79.7% as on 13 December 2024 from 79.5% a fortnight ago, while rose from 79.5% in December 2023 with the faster growth in deposits.

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 10.6% in November 2024 over a year ago, showing deceleration in growth compared with 20.9% increase in November 2023. The credit to agriculture accounting for 12.7% of total bank credit, expanded at slower pace of 15.3% in November 2024 from 18.1% growth in November 2023. Meanwhile, the credit growth to the industry accounting for 21.8% of total bank credit increased 8.0% in November 2024 compared with 6.1% growth in November 2023. Within the industrial segment, the advances to large industry rose 6.1%, while credit to medium industry moved up 20.0% in November 2024. The credit for the micro and small industry increased 10.1% compared with 16.9% growth in November 2023.

Credit growth to the services sector accounting for 27.7% of total bank credit, has moderated to 13.0% in November 2024 compared with an increase of 25.7% in November 2023, driven by deceleration in credit growth for NBFCs at 7.8%, other services 17.8%, commercial real estate 14.3% and wholesale trade (other than food procurement) 15.8%, while credit growth has also eased for retail trade to 13.1%, transport operators 14.6%, aviation 16.9%, tourism, hotels and restaurants 3.9% and professional services 19.4%. However, the services credit growth for shipping accelerated for 11.9% and computer software moved up 22.5% in November 2024.

Personal loans accounting for 32.8% of total bank credit, increased at decelerated pace of 13.3% in November 2024 as against an increase of 30.0% in November 2023. Among the major segments of personal loans, the credit for housing increased at slower pace of 12.2%, other personal loans 11.6%, vehicle loans 10.3%, credit card outstanding 18.1%, education 17.5%, advances against fixed deposits 15.2%, and consumer durables 4.8%. However, the credit growth has improved for loans against gold jewellery to 66.1%, and advances to individuals against share, bonds, etc 6.4% in November 2024 from November 2023.

Priority sector loans accounting for 42.7% of total bank credit, increased at a slower pace of 11.9% in November 2024 compared with a 17.7% growth in November 2023. Among priority sector loans, the credit growth for micro & small enterprises eased to 11.7% and housing 1.6%, while credit to agriculture & allied activities also moderated to 12.9% and weaker sections 13.3%.

Industry wise credit

Credit to the industrial sector accounting for 21.8% of the total banking sector credit increased 8.0% in November 2024 compared with a rise of 6.1% in November 2023.

As per industry-wise classification, the segments showing negative credit growth were gems & jewellery (-2.8% from 18.2%). However, the credit growth has moderated for textiles (5.4% from 15.2%, infrastructure (1.6% from 2.3%), cement & cement products (1.0% from 15.1%), vehicles, parts & transport equipment (4.5% from 10.5%) and basic metal & metal product (15.8% from 19.0%. The credit growth has also eased for beverage & tobacco (11.0% from 33.6%), glass & glassware (13.9% from 36.3%), wood & wood products (13.8% from 20.5%) and leather & leather products (4.0% from 4.1%).

On the other hand, the credit growth has accelerated for other industries (23.3% from -5.2%), petroleum, coal & nuclear fuels (8.1% from -10.0%), all engineering (18.3% from 9.6%), chemicals & chemical products (11.4% from 5.8%) and construction (10.7% from 5.7%). Further, the credit growth has improved for rubber, plastic & their products (12.0% from 6.8%), paper & paper products (12.8% from 6.5%), food processing (12.1% from 11.6%) and mining & quarrying (incl. coal) (0.6% from -1.2%), end November 2024 over November 2023.

Aggregate deposits

Aggregate deposits growth of the scheduled banks improved on sequential basis to 11.5% YoY at Rs 22067718 crore as on 13 December 2024, compared with 10.7% growth a fortnight ago and dipped from 13.3% rise a year ago. The time deposits of the banks moved up 11.4% at Rs 19464009 crore, while the demand deposits increased 12.3% to Rs 2603709 crore as on 13 December 2024.

Investments of the banking sector

The banks investment in government and other approved securities that qualify for treatment of statutory liquidity ratio increased 10.0% YoY to Rs 6556353 crore as on 13 December 2024, showing acceleration in growth from 8.4% increase a fortnight ago. The banks investment had moved up 17.6% in December 2023. The investment-deposit ratio was steady on sequential basis to 29.7% as on 13 December 2024 from 29.7% a fortnight ago, while eased from 29.8% in December 2023 with the faster growth in deposits. The investment-deposit ratio is much higher above the Statutory Liquidity Ratio of 18.0%.

Outlook

As per the latest financial stability report of the RBI, the soundness of banking system has been bolstered by strong profitability, lower non-performing assets and adequate capital and liquidity buffers. Return on assets (RoA) and return on equity (RoE) are at decadal highs, while gross non-performing assets (GNPA) ratio has fallen to a multi-year low.

As per the latest quarterly business updates from banks, the loan growth has eased for private banks, while deposits growth has also eased and CASA deposits growth continued to remain under pressure. The CASA deposit ratio has further declined in Q3FY2025. The moderation in growth has been mainly driven by the deceleration in lending to the unsecured retail lending segment. The banking sector has exhibited sharp decline in the disbursements to the microfinance segment in Q3FY2025.

On the other hand, the public sector banks have maintained stable credit as well as deposits growth in Q3FY2025. The CASA deposits growth remained muted for the public sector bank in Q3FY2025.

On the asset quality front, the unsecured segments such as microfinance and credit cards are likely to be major contributor to the fresh stress addition in Q3FY2025. The unsecured segment is likely to continue to put pressure on fresh slippages and credit cost for H2FY2025.