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Banks Lending Pattern has changed this year, Now Banks are giving more Loan to this sector


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In the fiscal year 2024, the lending pattern of banks underwent some noteworthy changes.

After experiencing a decline during the Covid period, lending to large companies rebounded in the last fiscal year. To enhance the quality of retail lending, the Reserve Bank of India (RBI) intervened by instructing lenders to assign higher risk weights to unsecured lending. While this measure slowed down the growth of such loans, it ultimately helped improve the loan portfolios of banks.

In the absence of factoring in the merger impact of HDFC and HDFC Bank, loans to the services sector exhibited faster growth at 20.2% compared to the retail sector’s growth at 17.7% in the year ended March 31, 2024, as per the latest sectoral deployment of bank credit data from the RBI. If we consider the impact of the HDFC merger, retail loans continued to lead the way with a growth rate of 27.6%, followed by the services sector at 22.9%.

In November 2023, the RBI increased the risk weights on unsecured consumer loans and credit cards by 25 percentage points, bringing them to a range of 125-150%. Consequently, the growth of unsecured loans slowed down to 20.8% in FY24, compared to the previous year’s growth rate of 26.7%.

Overall, excluding the impact of the HDFC merger, non-food bank credit experienced a growth rate of 16.3% in FY24, as opposed to 15.4% in the previous year, according to the RBI data.

Credit extended to the industry grew by 8.5% in comparison to the 5.6% growth in the previous fiscal year. Notably, credit growth in the chemicals & chemical products, food processing, and infrastructure sectors accelerated compared to FY23, while growth in the basic metal & metal products sector moderated.

Credit growth in agriculture and allied activities remained strong at 20.1% as of March 31, 2023, showing a significant increase from the growth rate of 15.4% in the previous year.

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