Bank Credit to Services Sector Surges 28.3% in September as Industrial and Agricultural Loans Rise 19.5%
Bank credit deployment across India recorded a broad-based surge at the close of the first half of the financial year, led by aggressive borrowing in services, manufacturing, and agriculture ahead of the festive season. According to the latest Sectoral Deployment of Bank Credit data released by the Reserve Bank of India (RBI), overall non-food credit expanded by 19.1% year-on-year (YoY) for the fortnight ended September 30, up significantly from 11.2% in the corresponding period of the previous year.
The data, collected from 41 select scheduled commercial banks accounting for approximately 95% of total non-food credit extended in the system, showed that total outstanding bank credit stood at around Rs 229.95 lakh crore, registering an annual expansion of 19.4%.
Services Sector Leads the Expansion
Credit to the services sector emerged as the fastest-growing major category, surging by 28.3% YoY in September compared with 9.9% a year earlier. The acceleration was underpinned by sharp credit off-take from non-banking financial companies (NBFCs), wholesale and retail trade, transport operators, commercial real estate, and professional services.
Key Drivers in the Services Segment:
- Bank credit to NBFCs rose 41.8% YoY to reach Rs 22.53 lakh crore, cementing its position as the primary engine of services lending.
- Lending to housing finance companies rebounded to positive territory, climbing 19.7% YoY after contracting 0.5% a year ago.
- Public financial institutions saw bank borrowings leap by 79.7%.
- Loans to the commercial real estate segment grew by 23.3%, rising from 15.6% during the same period last year.
- Niche service verticals also posted robust gains, with credit to computer software jumping 45.8% and aviation credit increasing 42.7%.
- In contrast, shipping credit moderated, expanding 9.4% compared with 32.5% in the year-ago period.
Industrial and Agricultural Credit Off-Take Accelerates
Industrial credit registered a strong turnaround, rising 19.5% YoY to Rs 49.77 lakh crore, a sharp acceleration from the 7.7% growth reported in September of the previous year. The RBI noted that lending to large and medium industries expanded at an accelerated pace, while micro and small enterprises maintained steady growth. Within the sector, medium enterprises outperformed with credit growth of 33.2%, while micro and small industries posted a 24.4% increase.
Bankers noted that a substantial portion of industrial credit was deployed to meet working capital requirements, driven by elevated input costs linked to ongoing geopolitical tensions in West Asia and pipeline drawdowns.
Major Industrial Beneficiaries:
- Core manufacturing segments including basic metal and metal products, engineering, chemicals and chemical products, food processing, and textiles recorded buoyant growth.
- Overall infrastructure lending rose 11.8%, driven by a 22.9% expansion in loans to the power sector.
- However, credit deployment in select infrastructure segments remained subdued, with road projects growing just 0.7%, telecom credit contracting 13.4%, and non-Indian Railways rail credit declining 22.5%.
Agricultural credit also maintained strong momentum. Credit to agriculture and allied activities expanded by 19.5% YoY, more than doubling from the 8.9% growth rate seen a year earlier.
Retail Lending Remains Resilient
The personal loans segment registered a 17.3% YoY increase, up from 11.5% in the previous year. Retail lending was supported by resilient demand for housing and vehicle loans, alongside faster credit expansion against fixed deposits. Conversely, growth in loans against gold jewellery and education loans moderated compared to the previous year, though overall volumes remained healthy.
With the busy lending season extending from October through March, senior public sector bankers anticipate credit drawdowns from existing sanctioned pipelines to stay robust through the third and fourth quarters, providing steady top-line support for Indian commercial banks.
