Banks expanded their loan books by Rs 7.2 lakh crore in the first three months of the fiscal year, reaching Rs 143.9 lakh crore. Of this, Rs 1.8 lakh crore (24.5%) comprised personal loans. Within personal, home loans constituted Rs 63,530 crore or 8.9% of incremental bank credit.
Credit numbers for the second quarter, however, are likely to be skewed towards the retail sector again due to the merger of HDFC with HDFC Bank. Home loans will get a considerable boost in the September quarter due to the addition of erstwhile HDFC’s loan book to HDFC Bank. Credit to housing finance companies too will dip due to the merger.
The June quarter saw Rs 87,392 crore lent to the industry, raising its share to 12.2% in fresh loans. According to economists, fresh investments by corporates are overdue because of high capacity utilisation. However, businesses are wary that high inflation may cool demand. As a result, infrastructure is expected to continue being a driver of industrial credit.
“Public sector banks have already provided higher sanctions to industry. We expect this to materialise in the second half of FY24, largely driven by the production-linked incentive (PLI)-based manufacturing, renewables and infrastructure sectors,” said India Ratings in a report.
The lion’s share of incremental bank credit went to services where the loan book grew by Rs 2.8 lakh crore. Services, which accounted for 33.4% of fresh loans in FY23, rose to 38.6% in the June quarter. Among services, aviation exhibited the fastest growth, with the loan book expanding by Rs 13,703 crore, more than three times the Rs 4,350-crore growth seen in FY23.
Loans to NBFCs also saw a significant increase of Rs 93,037 crore, equivalent to 13% of the total amount lent in the June quarter. In FY23, banks lent an additional Rs 3.1 lakh crore to NBFCs, accounting for 17% of their fresh advances. Personal loans’ share in incremental bank credit has declined significantly from 39% in FY23. In the previous fiscal year, banks had expanded their loan books by Rs 17.8 lakh crore, reaching Rs 136.7 lakh crore. In this period, personal loans amounted to nearly Rs 7 lakh crore (39%), with Rs 2.5 lakh crore (14%) allocated to home loans.
Last year, banks were more aggressively lending to retail customers, resulting in sluggish growth in loans to the industry, which increased by just 5.7% to Rs 33.3 lakh crore from Rs 31.5 lakh crore in the previous year.
In the first quarter, agriculture and allied activities also grew faster than overall bank credit. Banks grew their agriculture loan book by Rs 119 lakh crore to nearly Rs 18 lakh crore. In FY23, the share of agriculture in new bank credit (Rs 2.25 lakh crore) was 12.6%.
The data showed that infrastructure received the largest portion of loans within the industry sector, with credit expanding by Rs 30,477 crore, followed by metals and textiles. On the other hand, petroleum, coal sector and airports experienced deleveraging during this period.
