Non-food credit, accounting for 99.9% of the share of the total credit, recorded a growth of 19.1%, YoY, at Rs 16476192 crore as on 19 April 2024 as against a rise of 20.2% fortnight ago and 15.9% rise a year ago. Food credit dipped 15.0% to Rs 18090 crore as on 19 April 2024. The overall credit-deposit ratio decelerated on sequential basis to 79.5% as on 19 April 2024 from 80.3% a fortnight ago, while jumped from 75.1% in April 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 20.2% in March 2024 over a year ago, showing acceleration in growth compared with 15.4% increase in March 2023.

The credit to agriculture accounting for 12.6% of total bank credit, expanded at an improved pace of 20.1% in March 2024 from 15.4% growth in March 2023. Meanwhile, the credit growth to the industry accounting for 22.4% of total bank credit, increased 9.0% in March 2024 compared with 5.6% growth in March 2023. Within the industrial segment, the advances to large industry rose 7.0%, while credit to medium industry moved up 13.2% in March 2024. The credit for the micro and small industry increased 14.9% compared with 13.2% growth in March 2023.

Credit growth to the services sector accounting for 27.9% of total bank credit, has accelerated to 22.9% in March 2024 compared with an increase of 19.6% in March 2023, driven by acceleration in credit growth for other services at 37.7%, commercial real estate 38.9%, wholesale trade (other than food procurement) 21.4% and aviation 56.5%, while credit growth has also improved for transport operators to 19.9%, professional services 21.0%, tourism, hotels and restaurants 12.0%, shipping 0.0% and computer software 4.4%. However, the services credit growth for NBFCs decelerated to 15.3% and retail trade 13.2% in March 2024.

Personal loans accounting for 32.5% of total bank credit, increased at an accelerated pace of 27.6% in March 2024 as against an increase of 21.0% in March 2023. Among the major segments of personal loans, the credit for housing increased at improved pace of 36.9%, education 23.3%, and advances to individuals against share, bonds etc 11.3%.

However, the credit growth has moderated for advances against fixed deposits to 2.6%, other personal loans 20.8%, vehicle loans 17.3%, credit card outstanding 25.6%, and loans against gold jewellery 14.9% in March 2024 from March 2023.

Priority sector loans accounting for 43.2% of total bank credit, increased at an accelerated pace of 18.4% in March 2024 compared with a 13.7% growth in March 2023. Among priority sector loans, the credit growth for micro & small enterprises improved to 20.1%, agriculture & allied activities 19.4% and housing 21.3%, while credit to weaker sections eased to 16.7%.

Industrial credit growth

Credit to the industrial sector accounting for 22.4% of the total banking sector credit increased 9.0% in February 2024 compared with a rise of 5.6% in February 2023.As per industry-wise classification, the segments showing negative credit growth were petroleum, coal & nuclear fuels at (-) 10.9% and mining & quarrying (incl. coal) at (-) 9.6%.

However, the credit growth has moderated for basic metal & metal product (11.8% from 19.6%), cement & cement products (3.9% from 18.1%), wood & wood products (12.2% from 22.3%), rubber, plastic & their products (7.6% from 9.3%), paper & paper products (4.7% from 5.7%) and glass & glassware (25.8% from 32.9%). On the other hand, the credit growth has accelerated for infrastructure (6.5% from 0.4%) and other industries (22.3% from -4.5%).

The credit growth has also moved up for textiles (11.1% from 1.9%), food processing (14.9% from 5.1%), all engineering (11.2% from 4.3%) and gems & jewellery (7.6% from -3.9%). Further, the credit growth has improved for construction (9.3% from 3.5%), vehicles, parts & transport equipment (11.7% from 5.4%), chemicals & chemical products (11.5% from 10.0%), beverage & tobacco (30.6% from 28.8%) and leather & leather products (5.5% from 0.7%), end February 2024 over February 2023.

Aggregate deposits

Aggregate deposits growth of the scheduled banks decelerated on sequential basis to 13.3% YoY at Rs 20749252 crore as on 19 April 2024, compared with 13.5% growth a fortnight ago and jumped from 10.1% rise a year ago. The time deposits of the banks moved up 13.1% at Rs 18292381 crore, while the demand deposits increased 14.9% to Rs 2456871 crore as on 19 April 2024.

Investments of the banking sector

The banks investment in government and other approved securities that qualify for treatment of statutory liquidity ratio increased 12.9% YoY to Rs 6147420 crore as on 19 April 2024, showing acceleration in growth from 12.8% increase a fortnight ago. The banks investment had moved up 13.1% in April 2023. The investment-deposit ratio eased on sequential basis to 29.6% as on 19 April 2024 from 29.8% a fortnight ago, while it was nearly flat from 29.5% in April 2023. The investment-deposit ratio is much higher above the Statutory Liquidity Ratio of 18.0%.

Outlook

The banking sector has continued to post healthy earnings show with strong return ratios supported by low credit cost. The asset quality has continued to improve to one of the best levels. The loan growth is strong across the segments despite high base. The deposit growth has also improved in Q4FY2024. The deposit growth has been supported by strong term deposits growth.

The banking sector is witnessing pressure on margins which is impacting NII growth. However, the banking sector has witnessed some improvement low cost Casa deposits in Q4FY2024 after decline for last many quarters. The repricing of the deposits is also almost complete after hike in policy repo rate since May 2022. Thus, the pressure on cost of deposits has moderated

The core fee income and treasury income has been healthy in Q4FY2024. The core fee income may remain steady with stable business activity. The expectation of policy rate cuts in H2FY2025 and decline in inflation is likely to support treasury gains and may also lead to write back of provision for depreciation of investment book.

The asset quality and stressed asset level of the banking sector has continued improve with stable fresh slippages of loans. The fresh slippage of loans is likely to remain under control, despite some concerns for asset quality in the unsecured loan segment. The banks have also built strong PCR and healthy contingency provision buffers.