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Indian Banks experience steady credit growth despite hikes in repo rates

June 07, 2023

Indian Banks experience steady credit growth despite hikes in repo rates
Despite the Reserve Bank of India (RBI) raising the repo rate by 250 basis points in FY2023, the lending strength of Indian banks remains steady, according to a Bank of Baroda report. This resilience stands out as the central bank kept its policy rate consistent in its first bi-monthly policy of FY2024, with interest rates hovering above the average. 

Nevertheless, this has not impacted borrowing, which continues its ascent, propelled by robust demand. Bank lending growth rose to 15.9 per cent in April 2023 from 15 per cent in March 2023, the report detailed.
 
Lending to agriculture increased to 16.7 per cent in April 2023, up from 15.4 per cent in March 2023, preceding the vital cropping season. Bank credit towards agriculture expanded 2.27 per cent month-on-month from March 2023 to April 2023.
 
While somewhat low-key, industrial credit growth received a lift, increasing by 7 per cent compared to 5.7 per cent in March 2023. This boost resulted primarily from large firms, showing growth of 5.3 per cent against 3 per cent in March 2023. Medium-sized industries displayed consistent growth at 19.1 per cent, but lending growth to micro and small industries decreased to 9.7 per cent in April 2023, down from 12.4 per cent in March 2023.
 
The services sector saw credit growth rising to 21.6 per cent compared with 19.8 per cent in March 2023. The aviation sector witnessed a notable rise in credit growth to 30 per cent in April 2023 from 18.1 per cent in March 2023 with air travel returning to an upswing.
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