Commercial sector funding more than doubles to ₹10.65 trn in April-July | Finance News

Loans to the commercial sector more than doubled to ₹10.65 trillion during April-July this financial year from ₹4.48 trillion a year earlier, driven by a sharp increase in non-food bank credit, according to the latest data released by the Reserve Bank of India.

Credit growth was broadbased across industry, services, agriculture and personal loans, with infrastructure also witnessing healthy demand, analysts said.

Large companies, as well as micro, small and medium enterprises (MSMEs), also displayed a broadbased expansion, they said.

The RBI data showed non-food bank credit, at ₹6.69 trillion, was sharply higher than the ₹0.73 trillion in the year-ago period.

Outstanding credit from bank and non-bank sources stood at ₹323.14 trillion as of July 31, up 17.4 per cent year-on-year.

Non-bank loans rose to ₹3.96 trillion during April-July from ₹3.76 trillion a year previously, while those from foreign sources increased to ₹2.08 trillion from ₹1.39 trillion.

Analysts attributed the increase in foreign sources to recent RBI measures on external commercial borrowing (ECB) and overseas borrowing.

“Growth has been broadbased across segments, whether it be retail or corporate, and whether you look at infrastructure. All segments have been firing. In non-bank sources, foreign sources likely grew on account of foreign direct investment,” said Saurabh Bhalerao, director, CareEdge Ratings.

In its latest monthly bulletin, the RBI said bank credit continued to record robust growth across major sectors in June.

Credit to the agricultural sector accelerated, while industrial credit growth sustained its momentum, aided by an expansion in credit to large industries.

Personal loans also picked up in June, supported by housing loans and those against gold jewellery.

All industry categories — micro, small, medium, and large — displayed a broadbased expansion, the RBI said.

Among major industries, credit to infrastructure, engineering, food-processing, textiles, construction, basic metals and metal products, petroleum, coal products and nuclear fuels, and chemical and chemical products recorded buoyant year-on-year growth.

Personal loans grew 15.8 per cent in June, compared with 11.7 per cent in the same month a year ago.

Banks are increasingly focusing on MSMEs and secured retail, with gold and vehicle loans witnessing growth, while housing credit has been relatively slow amid yield pressures, said Sachin Sachdeva, vice-president and sector head, financial sector ratings, Icra.

“Most banks have remained focused on MSMEs and secured retail over the past few quarters. Within secured retail, growth has been particularly strong in gold loans and vehicle loans, as banks seek to maintain yields amid pressure on funding cost. Within the mortgages segment, the focus is more on loans against property (LAP) than home loans as the former offer better yields,” Sachdeva said.

“Alongside MSMEs and secured retail, banks have also seen growth in corporate books in the last few quarters. Persistently elevated yields in the bond market led to shifting some credit demand to banks, which continued to offer relatively attractive financing rates. Additionally, the steady asset quality in the wholesale books in the last few years has boosted the sector’s confidence and supported a renewed focus on corporate lending,” he added.

Sachdeva also pointed to an increase in corporate credit deployment over the past two-three quarters, supported by improving asset quality.