Substantial drop in credit growth (YoY) across sectors as momentum turned negative: SBI

NEW DELHI: The credit growth across all sectors is declining as the momentum has turned negative, according to a State Bank of India report.
The report underlined a sharp slowdown in incremental credit and deposits compared to the previous year, indicating a challenging environment for banking sector growth.
It said, “It’s clear that credit growth is declining across sectors as momentum has turned negative, even as favorable base effect is waning”.
The report highlighted that as of November 15, 2024, incremental credit from all scheduled commercial banks (ASCBs) has grown by Rs 9.3 lakh crore, marking a year-to-date (YTD) growth of 5.3 per cent. This is a significant drop from last year’s growth of Rs 19.4 lakh crore (YTD 14.2 per cent).
Similarly, deposits have grown by Rs 13.7 lakh crore (YTD 6.7 per cent) this year, compared to Rs 16.0 lakh crore (YTD 8.9 per cent) during the same period last year. The report attributed this slowdown to the diminishing favorable base effect and the negative momentum in credit growth.
The report pointed out that credit growth has slowed across key sectors, including agriculture, industry, services, and personal loans. Notably, credit to housing and consumer durables has declined sharply in absolute terms. In the industrial sector, credit disbursement has significantly reduced for most industries except chemicals, construction, and rubber/plastic/paper products.
“Slowdown is evident in all Agri & Allied sector, Industry, Services and Personal loans (vis-a-vis Last year) while credit to housing, Consumer durables credit have nosedived in value terms” said the report.
A shift in the demographic pattern of credit disbursement is also evident. Metro cities continue to dominate bank credit, holding a 60.6 per cent share, followed by urban areas at 17.9 per cent, semi-urban areas at 13.8 per cent, and rural branches at 7.7 per cent.
The report emphasized the need to increase the share of rural and semi-urban areas in the overall credit distribution while ensuring a balanced approach in metro regions.
Looking ahead, the report estimated that both credit and deposit growth will stabilize within the range of 11-12 per cent for the fiscal year 2025.
The report called for fine-tuning credit outreach strategies to address disparities and optimize growth across different regions and sectors.