Bank lending to businesses grows by 16.3% in March

Excluding the impact of the merger, the growth in bank credit to businesses rose by 14.6 per cent on a year-on-year basis, up 210 basis points (bps) compared to March 2023. One basis point is one-hundredth of a percentage point.

Bank loans to industry segment increased to 9 per cent y-o-y in March 2024 compared to 9.1 per cent y-o-y in February 2024 and 5.6 per cent in March 2023 as slower growth in large corporates was partially offset by growth in MSME, a CareEdge Ratings report said. If the merger impact is excluded, growth would have been slower at 8.5 per cent.

Outstanding credit to industries stood at Rs 36.83 lakh crore as of March 2024, as against Rs 33.8 lakh crore, the RBI data showed.

The credit to large industries grew 7 per cent y-o-y to Rs 26.51 lakh crore in March 2024, as against a growth of 3.1 per cent in March 2023. In the infrastructure sector (sub-segment within the industry, having 34.8 per cent share), bank credit to the telecommunications sector grew by 27.5 per cent in March 2024, as against a de-growth of 14.8 per cent in the year-ago period. Loans to the airport sector de-grew by 24.8 per cent compared to a growth of 42.8 per cent in March 2023, the RBI data showed. The power segment (the largest segment of infrastructure, with a share of 50.4 per cent) witnessed a growth of 3.9 per cent in March 2024 versus a rise of 1.4 per cent in March 2023.

“Over the past few years, while exposure of banks to the power sector has remained largely range-bound, power-focused IFCs (Infrastructure Finance Companies), supported by government schemes and improved financial position, have been consistently growing their loan book,” the CareEdge report said.

The share of power-focused IFCs in exposure to the power sector vis-a-vis banks has gradually increased from 55 per cent as of March 31, 2020, to 59 per cent, as of March 31, 2023, and is expected to further increase to 63 per cent by March 31, 2024, it said. The services sector reported a robust growth of 22.9 per cent y-o-y in March 2024 compared to a growth of 19.6 per cent in the year-ago period due to growth in commercial real estate (merger impact and demand), and transport operators.

Without considering the merger, the growth in bank credit to services was 20.2 per cent y-o-y. Meanwhile, the growth rate for NBFCs (15.3 per cent vs 30 per cent) and trade (13.2 per cent vs 22.4 per cent) moderated.

In March 2024, the gross bank credit offtake witnessed an increase of 20.2 per cent y-o-y, propped by the impact of the merger between HDFC twins, the report said. Without considering the merger, the y-o-y growth stood at 16.3 per cent, higher by 130 bps than last year’s growth number of 15 per cent.