RBI Report Highlights Personal Loans and Services as Key Drivers of Bank Credit Growth in 2023-24
New Delhi, December 27: A recent report by the Reserve Bank of India (RBI) has revealed that the growth of bank credit in 2023-24 has been broad-based, with the personal loan and services sectors emerging as key contributors. These two sectors have led the expansion, followed by growth in agriculture and the industrial sectors.
According to the report, “Bank credit growth in 2023-24 was broad-based, led by services sector and personal loans segment, followed by agriculture and industry.” This indicates a diversified credit portfolio by banks, which is crucial for enhancing profitability while managing risks effectively.
One important aspect of the RBI’s report is its reference to the impact of stricter lending norms introduced in November. These regulations have influenced areas like consumer durables, credit card receivables, and loans to non-banking financial companies (NBFCs), where the increase in risk weights resulted in slower credit growth in these segments.
The report also noted a significant change in the share of personal loans and services in total bank credit. At the end of March 2013, personal loans accounted for 17.1% of the total credit, while services held a 21.9% share. By the end of March 2024, personal loans had grown to 32.4%, and services to 27.9%. This shift reflects banks’ growing focus on diversifying their credit portfolios and targeting higher-margin sectors.
On the matter of asset quality, the RBI report highlighted sector-specific variations in the gross non-performing assets (GNPA) ratio. As of September 2024, the agricultural sector recorded the highest GNPA ratio at 6.2%, while the retail loans segment posted the lowest at 1.2%. The industrial sector, in particular, showed significant improvements in asset quality, with its GNPA ratio dropping to 2.9% in September 2024, continuing its positive trend since March 2018.
Additionally, education loans saw a considerable reduction in GNPA ratios, dropping from 5.8% in March 2023 to 2.7% in September 2024. Despite this improvement, education loans still have the highest GNPA ratio among retail loan segments, followed by credit card receivables and consumer durables.
The RBI’s report underlined the importance of risk management and credit diversification as essential strategies for banks to sustain growth and profitability, all while ensuring the stability of the financial system.
