Retail, loans to NBFCs and large corporates prop up credit demand

economictimes.indiatimes.com:

Bank loans rose 16.3 percent in June as retail and large corporate loans accelerated while credit to the small and medium enterprises slowed, RBI data showed. Also bank loans to NBFCs continued to post a strong growth. Retail loans rose 20.9 per cent (y-o-y) in June 2023 compared to 18.1 per cent a year ago, mainly supported by ‘housing’ and ‘vehicle’ loans.

" The rapid pace of personal (retail) loan growth (both housing and non-housing) has been supporting overall credit expansion" said a report on the state of the economy published in RBI's latest monthly bulletin. «Accordingly, the share of personal loans in total bank credit has surged to 28 per cent in 2022-23 from 21 per cent in 2017-18». Loans to industries rose 8.1 per cent (y-o-y) in June 2023 as compared with 9.5 per cent in June 2022.

But loans to large firms rose almost at a double pace of the same period last year by 6.4 per cent (3.2 per cent a year ago). The pick up loans to large firms could be attributed to a pick in capes as private investment displays signs of vigour point experts. " Several corporates have expressed intentions to expand capex over the near term, albeit largely concentrated in the infrastructure and auto space.

Improvement in credit off-take by banks and the Government’s capex push remain as tailwinds that could usher in a wider private sector capex recovery, premised on domestic consumption continuing to offer support" said a report by economics research firm QuantEco Research. " While credit to both small and medium sized firms slowed this June. Credit to medium industries grew by 13.2 per cent (47.8 per cent last year) and micro and small industries by 13.0 per cent (29.2 per cent a year ago)".