Bank credit growth declined to 14.8 per cent year-on-year (y-o-y) in July 2023 when compared to 15.1 per cent a year ago due to deceleration in credit demand from industry and personal loan segments.

However, demand for credit from sectors such as agriculture and allied activities, and services was robust, per RBI data.

Industry credit growth decelerated to 5.2 per cent (y/y) in July 2023, compared to 10.5 per cent in July 2022. 

“Among major industries, credit growth (y-o-y) to basic metal & metal products and textiles accelerated in July 2023 when compared to the corresponding month of the previous year.

“Credit growth to chemicals & chemical products, food processing and infrastructure decelerated/contracted,” said the RBI in a statement.

Personal loans growth declined to 18.4 per cent (y-o-y) in July 2023 (18.7 per cent a year ago), supported by ‘housing’ and ‘vehicle’ loans.

Credit growth to agriculture and allied activities improved to 16.8 per cent (y-o-y) in July 2023 from 13.2 per cent a year ago.

Credit growth to services sector accelerated to 19.4 per cent (y-o-y) in July 2023 from 16.7 per cent a year ago, primarily due to ‘trade’ and ‘commercial real estate’.

The outlook for bank credit offtake remains positive, supported by factors such as economic expansion, increased capital expenditure, the implementation of the PLI scheme, and a push for retail credit,CARE Ratings said in a report.

The rating agency estimates that credit growth is likely to be in the range of 13.0-13.5 per cent for FY24, excluding the the impact of HDFC’s merger with HDFC Bank.

“The personal loan segment is expected to perform well compared to the industry and service segments in FY24. However, elevated interest rates and global uncertainties could potentially impact credit growth in India,” CARE Ratings said.

Deposit growth is expected to improve in FY24 as banks look to shore up their liability franchise and ensure that deposit growth does not constrain the credit offtake, it added.