Bank loans The services sector has overtaken the industrial sector for the first time, establishing that the former will contribute more to incremental growth and the latter is yet to bite the bullet when it comes to capacity expansion.
Data available up to November 18, 2022 Outstanding loans Services sector grew by 21.3% year-on-year to ₹33.15 lakh crore. During the same period, outstandings for the industrial sector increased by 13.8% to ₹32.94 lakh crore.
Credit expansion to the services sector is largely driven by loans to non-banking financial institutions, experts said.
“We are seeing an improvement in confidence in non-banking financial institutions; the credit growth you are seeing is a reflection of that,” Deputy Managing Director Suresh Khatanhar said. IDBI Bank. “NBFCs have a very large lending segment, especially volume-wise, and you will see that segment grow bigger and bigger as the economy picks up.”
Provision to NBFCs now accounts for 10.2% of outstanding non-food credit. Of the ₹5.89 lakh crore growth in vertical services in the last 12 months, 52% was for NBFCs and 22% for other services.
Among non-banks, loans to major financial institutions grew by 87.9% year-on-year and loans to household financial institutions by 16.1%.
“After shedding high risk assets and consolidating for a while, NBFCs are now pursuing growth opportunities in a risk-calibrated manner,” said analyst Kunal Shah. ICICI Securities. “We expect bank lending to NBFCs to pick up in the current fiscal, unlike the decline seen recently.” NBFCs increased their share of bank loans to 20-64% by September 2022. According to an analysis by Kotak Institutional Equities, the highest change was seen in Optus and Mahindra Finance, which saw their share of bank loans increase by nearly 15 percentage points as of September 2022. Diversified NBFCs grew at a pace of 23% YoY, driven by funds from the banking system, while auto finance NBFCs posted a growth of 15%.
“As bond yields and short-term rates have increased in the last four quarters, NBFCs have clearly shifted credit to banks in CPs (commercial papers) and NCDs (non-convertible debentures),” said Nishinth Savade, Associate Director. Kotak Securities.