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Bank loans to services sector surpass credit to industries

January 03, 2023

Bank loans to services sector surpass credit to industries
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%.

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