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Credit Growth Eases in October, Influenced by HDFC-HDFC Bank Merger Impact

December 01, 2023

Credit Growth Eases in October, Influenced by HDFC-HDFC Bank Merger Impact
In October 2023, the growth of bank credit in India witnessed a slowdown, impacted by the merger of HDFC with HDFC Bank, according to the Reserve Bank of India’s latest data on credit deployment. On a year-on-year basis, non-food bank credit increased by 15.3%, a decrease from 18.3% in the same period last year. Excluding the merger effect, credit off-take showed a healthier 19.8% growth this year.

The services sector experienced a 20.1% year-on-year growth in credit, slightly down from 22.5% last year, mainly due to increased loans to non-banking financial companies (NBFCs) and trade. Economists are closely watching the sustainability of this growth, particularly for NBFCs, considering recent capital norms.

Retail loans decelerated to 18.0% year-on-year in October 2023, primarily due to a slowdown in housing credit, marking a decline from 20.5% a year ago. Retail loans constitute 32% of the credit share, followed by services at 29%, and industry at 25%.

Credit to the industry grew by 5.4% year-on-year in October 2023, significantly lower than the 13.5% growth in October 2022. Large manufacturing remains a laggard with a mere 2.8% growth. Credit growth to agriculture and allied activities, however, improved to 17.5% year-on-year in October 2023 from 13.8% a year ago. 
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