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In September 2023, loans to the industry increased by 7.1% as opposed to 12.6%, and in August, by 6.7% as opposed to 11.4% in the corresponding month of the previous year.

With fresh investments by the corporate sector not taking off in a big way and demand for loans remaining lacklustre, bank credit to industries has seen a moderation in growth over the past few months.

In November 2023, bank loans to industries, which consist of micro and small, medium, and large segments, registered a lower year-on-year (y-o-y) growth of 6.6 per cent to Rs 36 lakh crore as compared to a growth of 13 per cent (Rs 33.77 lakh crore) in the same month of last year, according to the Reserve Bank of India (RBI) data. On the other hand, the central bank has reported an overall non-food credit growth of 20.8 per cent as of November, aided by the 30.1 per cent growth in personal loans.

RBI data shows credit to industries in October 2023 moderated to 5.9 per cent from 13.5 per cent in October last year. Loans to industries grew at 7.1 per cent in September 2023 as against 12.6 per cent, and at 6.7 per cent in August against 11.4 per cent in the same month of last year. In July, credit to industry rose by 5.8 per cent compared to 10.5 per cent last year in the same month.

In the total loans to industry, the large corporates accounted for the maximum share of around 72 per cent. The share of bank credit to micro and small segments was around 19 per cent, and that of medium industries was close to 7 per cent.

“The large industry is the one which has been lagging because there is not much investment taking place from the private sector. It is more of a case of demand (for loans from large corporates) because there is no issue in terms of NPAs or banks not willing to lend,” said Madan Sabnavis, Chief Economist, Bank of Baroda.

Investments that are happening are very scattered, with very few industries making investments. So, when large corporates are not investing, they are not borrowing extensively from banks, he said. “Fresh investments that have been announced also take time to fructify. Even if banks have sanctioned loans, the time period of disbursing the project loan is two or three years depending on the overall tenor,” said a senior banker.

Corporates are either utilising their cash balances or are accessing domestic and also foreign markets to raise money, for making any investments, he said.

Credit to the infrastructure sector, which has a share of 35 per cent in the overall bank loans to industry, grew by 2.1 per cent in November 2023 compared to 11.1 per cent growth last year.

Within the infrastructure segment, credit to roads has fallen to 6.4 per cent in November from 14 per cent last year. Loans to the power sector degrew 0.4 per cent in November compared to a growth of 8.6 per cent last year in the same month.

Bankers expect loan demand from corporates to remain subdued until the Lok Sabha elections later this year. “Despite an expectation that the current government at the Centre will be re-elected, companies would want to know what happens when the new government comes to power. They will closely watch the new set of policies and the benefits they would get from those. Accordingly, they will take any investment decision,” said a banker from a private bank.

In November 2023, credit to medium industries moderated to 12 per cent as against 28 per cent last year.

Loans to micro and small industries registered a growth of 17.2 per cent in November 2023 compared to 19.5 per cent a year ago.

Bankers said the slowdown in loans to micro industries is not much as credit given to the segment comes under priority sector lending and so, banks focus more on such loans to meet the regulatory requirement.

This article was orginally published on indianexpress!

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