Bank loans to the services sector have surpassed those to the industrial segment for the first time, establishing that the former will be contributing more for incremental growth and that the latter is still not biting the bullet when it comes to capacity expansion.
Data available till November 18, 2022, show the outstanding loans to the services sector at ₹33.15 lakh crore, up 21.3% in one year. Outstanding loans to the industrial sector rose 13.8% in the same period to ₹32.94 lakh crore.
The expansion in credit to the services sector has largely been driven by loans to non-bank financing companies, said experts.
“We are seeing confidence improve towards the non-bank financing companies; the credit growth you see is a reflection of that,” said Suresh Khatanhar, deputy managing director,
. “The NBFCs have a very large credit segment, especially volume wise, and as the economy picks up you will see that segment grow larger and larger.”
Lending to NBFCs now constitutes 10.2% of the outstanding non-food credit. Of the incremental accretion of ₹5.89 lakh crore in the services vertical over the past 12 months, 52% was towards NBFCs and 22% towards other services.
Among non-banks, loans to mainstream financial institutions were up 87.9% on year and to housing finance companies were up 16.1%.
“Incrementally, after running down high-risk assets and consolidating for a while, NBFCs are now pursuing growth opportunities in a risk-calibrated manner,” said analyst Kunal Shah of . “We expect bank lending to NBFCs to rise in FY23 unlike the deceleration seen in the recent past.”
NBFCs increased the share of bank loans to 20-64% in September 2022 from 19-57% a year earlier. According to an analysis by Kotak Institutional Equities, the highest shift was visible in Aptus and Mahindra Finance which saw the share of their bank loans increase by nearly 15 percentage points as of September 2022. Owing to the funds from the banking system, diversified NBFCs have grown at the fastest pace at 23% on year, while vehicle finance NBFCs delivered 15% growth.
“NBFCs have clearly shifted borrowings to banks from CPs (commercial papers) and NCDs (non-convertible debentures) as bond yields and short-term rates increased in the last four quarters,” said Nischint Chawathe, associate director, Kotak Securities.
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