Public sector banks’ (PSBs) share in incremental credit declined by three percentage points to 51 per cent in September 2024 from 54 per cent a year ago as they moderated the pace of disbursements to non-banking finance companies and unsecured credit.
The monetary policy report released along with the policy review in September 2024 said PSBs continued to account for the largest share of incremental credit, although their share declined vis-à-vis private sector banks and foreign banks.
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The share of private sector lenders’ incremental credit declined marginally from 45.9 per cent in September 2023 to 45.5 per cent in September 2024. The foreign banks’ share grew from below 0.5 per cent in September 2023 to 3.5 per cent in September 2024.
PSBs’ credit growth on a year-on-year (Y-o-Y) basis stood at 12.9 per cent in September, lagging behind 16.4 per cent Y-o-Y of private lenders, according to the monetary policy report.
Anil Gupta, co-group head – financial sector ratings, ICRA, said the state-owned banks have been giving out substantial amounts to finance and housing finance companies. However, PSBs scaled down that lending after regulatory caution and an increase in risk weights for exposure to non-banking finance companies (NBFCs) in November 2023.
A senior public sector banker said PSBs are more sensitive to regulatory signals and compliance. In fact, Reserve Bank of India (RBI) Governor Shaktikanta Das in the monetary policy statement on Wednesday asked NBFCs to shun the “growth at any cost” approach. This would definitely have a bearing on banks’ lending to NBFCs.
RBI data showed the outstanding bank credit to finance companies has been shrinking over the last four months. It declined from Rs 15.58 trillion in May 2024 to Rs 15.22 trillion in August 2024.
PSBs were also active in the personal loans space after the pandemic. Though most of these loans are given to salaried employees working with government and public sector units, banks are now going slow in this segment, PSB executives said.
The growth in the other personal loan category, which consists mainly of unsecured credit, fell sharply to 13.2 per cent Y-o-Y in August 2024 from 23.7 per cent in August 2023. The pace of growth in credit card outstanding also fell to 19.9 per cent from 31.4 per cent, RBI data showed.
First Published: Oct 10 2024 | 6:52 PM IST
