Scheduled commercial banks’ (SCBs) credit growth moderated in March 2023 due to unfavourable base effects and tapering of the momentum of credit offtake, especially for industry, according to an article in Reserve Bank of India’s latest monthly bulletin.

SCBs’ credit growth moderated to 15 per cent as on March 24, 2023, from the peak of 17.8 per cent recorded in October 2022.

The deceleration in industrial credit since November 2022 was on account of micro, small and medium enterprises (MSMEs) and large industries, with a decline in credit offtake from the infrastructure segment, per the article titled ‘State of the Economy’ put together by senior RBI officials.

Retail loans remained the major driver of overall credit growth, followed by the services sector, the officials said.

“Personal loans growth at 20.4 per cent in February was boosted by housing loans, vehicle loans and other small-ticket loans. Consumer durable and credit card loans expanded at a robust pace, reflecting growing consumer demand,” the authors said.

NBFCs’ contribution

Credit growth to the services sector was largely contributed by non-banking finance companies(NBFCs).

“Bank credit growth has been broad-based recording double-digit growth across all population groups (rural, semi-urban, urban and metropolitan). There is a rising demand for working capital loans,” according to the officials.

Deposit growth

Aggregate deposits with banks increased by 9.1 per cent year-on-year(y-o-y) as on March 24, 2023 (8.4 per cent a year ago), per the article. Net accretions to non-resident deposits increased to $6.4 billion in April-February 2022-23 from $2.4 billion a year ago.

As on April 7, 2023, SCBs’ credit-deposit (C-D) ratio stood at 75.8 per cent (71.5 per cent as on April 8, 2022).

The incremental C-D ratio, which had slipped below 50 per cent around the onset of the pandemic and remained low up to late 2021, surged to 142.2 per cent in November 2022 before moderating to 110 per cent as on April 7, 2023, the authors said.