Bank credit to industries slows down, shows RBI data

In absolute terms, total outstanding loans to the sector stood at Rs 35.72 lakh crore in October 2023 -- up from Rs 33.72 lakh crore in October 2022, the data showed.

Lending to industries, which include micro and small, medium and large, dropped to 5.9 percent in October 2023, compared with 13.5 percent in October 2022, according to the Reserve Bank of India's (RBI) sectoral credit data for October 2023.

In absolute terms, total outstanding loans to the sector stood at Rs 35.72 lakh crore in October 2023 -- up from Rs 33.72 lakh crore in October 2022, the data showed.

Also read: Banks' lending to aviation, commercial real estate jumps sharply: RBI data

Drop in growth

Small industries grew 16.9 percent in October 2023, compared to 20.2 percent in October 2022. In absolute terms, credit to micro and small industries stood at Rs 6.83 lakh crore in October 2023. The same in the corresponding period last year was at Rs 5.84 lakh crore. In October 2021, it was Rs 4.86 lakh crore.

For medium industries, bank credit grew at 12.1 percent in October 2023 versus 29.6 percent in October 2022. In absolute figures, credit in October 2023 stood at Rs 2.8 lakh crore versus Rs 2.5 lakh crore last year.

The large industries, which saw a good chunk of bank credit, grew a mere 2.8 percent from 10.7 percent last year. In October 2023, bank credit to large industries stood at Rs 26.08 lakh crore versus Rs 25.37 lakh crore in October 2022.

Expert take

According to experts, credit to small and micro and medium industries fell due to a perceived risk aversion among banks. This led to cautious lending by banks.

A report by TransUnion CIBIL and Small Industries Development Bank of India (SIDBI), in August 2023, said that lenders are cautious on providing loans to the micro, small and medium enterprises (MSME) segment, despite high demand, availability of analytical data and lower delinquencies.

"Credit flow to the MSME sector is slower, compared to the increasing demand as lenders follow a cautious approach on commercial lending," the report said.

Saurabh Bhalerao, Associate Director, CareEdge, said that credit to large industries saw slow growth as companies borrowed more from other sources like the bond market and organisations like Power Finance Corporation (PFC).

“Compared to last year, borrowings by large industries have increased in the bond market and from organisations like PFC. Simultaneously, some of the slow growth in credit can also be attributed to lower capital requirement by industries from banks,” Bhalerao said.