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NBFCs driving bank credit growth in India: Report
The strong growth of bank credit was led by Non-Banking Financial Services (NBFCs) in August this year, according to the latest CareEdge ratings report.
Author: Mint
Published: October 11, 2023
There has been a significant rise in bank credit for the past few months in the current financial year. The trend continued in August as well, where gross bank credit offtake increased by 19.8 % YoY. Among all the factors, Non-Banking Financial Services (NBFCs) emerged as the leading contributor in bank credit performance, according to latest CareEdge Ratings report.
Personal loans and services segments emerged as major contributor in bank credit growth. Services segment reported a strong growth of 24.7% YoY in August 2023. Non-Banking Financial Services (NBFCs), trade and commercial real estate played a key role in boosting sector performance in August FY24. NBFCs grew by 25.8 per cent YoY in August 2023 compared to the same period a year ago. Other than these factors, HDFC Bank merger also had a significant impact on the credit offtake.
Impact of HDFC merger on bank credit growth
According to CareEdge data, gross bank credit offtake increased by 19.8% YoY in August 2023. After excluding the impact of the merger between HDFC Bank and HDFC, the y-o-y growth stood at 14.9%.
The merger had a collective impact on all the segments of credit offtake. Service segment reported a rise of 24.7% y-o-y in August 2023. After eliminating the impact of the merger, it reported a growth of 20.7% y-o-y vs. 17.4% a year ago.
In personal loans segment, merger fuelled its growth to 30.8% y-o-y in the month. Excluding the impact of the merger the growth rate for personal loans reduced marginally by 110 bps y-o-y from 19.4% to 18.3% on a y-o-y- basis.
NBFC growth in August FY24
NBFCs grew by a robust 25.48% YoY in August 2024 from a growth of 25.5% in August 2022. The robust growth was due to continued healthy loan disbursements reported by NBFCs for their dependency on the banking system especially by the smaller NBFCs. However, NBFCs’ growth reduced from 35.1% y-o-y in June 2023 due to the reclassification of HDFC’s borrowings. The growth in services is largely driven by NBFCs, if it were excluded, the growth came in at 12.4% y-o-y in the month.
(Link of the original article - https://www.livemint.com/industry/banking/nbfcs-driving-bank-credit-growth-in-india-report-11696853191735.html)