Bank credit growth continued to disappoint during first half of the current fiscal with an annual growth of just 8.4 per cent at Rs62.02 trillion (Rs62.02 lakh crore), down 20 bps, as per Care Ratings.
Debt market growth was, however, robust with debt issuances increasing 18.6 per cent. Reflecting the lingering pain of the manufacturing sector, which accounts for 42 per cent of bank credit, the demand remained negative yet again. Services come second at 23 per cent of the total and agriculture at third with a share of 13 per cent and personal loans 20 per cent.
The decline in the services sector demand is mainly due to a steeper decline in loan demand from NBFCs which have been raised 16 per cent more funds from the debt market. This suggests a shift in sourcing funds for NBFCs from banks to the debt market where interest rates have moved downwards at a faster rate.
For the first half, credit demand would have been much lower had it not been for the agriculture loans and personal loans segments.
Out of the total Rs62.02 trillion loan of the system in H1, food credit stood at Rs1.03 trillion, up 3.6 per cent, while in the year-ago period demand grew by 15.6 per cent, while non-food credit 1.6 per cent to Rs60.99 trillion, against 1.5 per cent pick-up in the year ago period.
Out of the total non-food credit, agriculture & allied activities cornered Rs8.13 trillion, up 6.2 per cent, down from 8.2 per cent a year ago, and the industrial credit declined 1.1 per cent to Rs26.29 trillion, while the same down -0.4 per cent a year ago, the agency said quoting bank's and RBI figures.
What is worse is that even the services sector demand at Rs14.01 trillion declined by 0.8 per cent, which was an improvement from -1.1 per cent decline last year.