Major drop in the overall growth rate of loans and food credit

Release of credit data on a monthly basis is one of the RBI's key responsibilities in its role as the primary regulator of the nation's financial industry. These studies provide perceptions of the state of the economy, assisting analysts and decision-makers in assessing the general expansion of credit in India.

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However, the most recent credit data from July poses some relevant issues, particularly in light of the HDFC merger's effects and the implications for numerous economic sectors.

Bank credit growth fell to 14.8% in July, down from 18.7% in June

The overall growth rate for loans and food credit is 14.8% when HDFC is taken out of the equation. Although this rate is healthy, it is significantly lower than the 18.7 percent recorded in June. The term "food credit" refers to bank loans given to the Food Corporation of India (FCI), mostly for the purchase of food grains.

The data on loan growth offers fascinating insights into many industries.

Corporate Sector: Loans in the corporate sector increased by 14.5 percent in July. This, however, is a lower growth rate than the 17.7 percent saw in June, pointing to a probable slowdown.

Agriculture: Compared to the 19.7% growth in credit recorded the month prior, agriculture credit growth in July was only 16.8%. This year-over-year (YoY) statistics show a small drop in credit expansion.

Housing: When HDFC is taken into account, the growth in housing loans jumps to a remarkable 38%. But without HDFC, banks have only increased loans by 13.1%, showing a significant discrepancy in the figures.

MSMEs: Although a positive number, the credit growth recorded by MSMEs in July was lower than the growth seen in June. MSMEs: Micro, Small, and Medium Enterprises (MSMEs) reported a credit growth of 14.1% in July.

Auto: The credit increase for the auto industry in July was 21.2 percent, which is respectable but still less than the growth seen in June.

Credit Cards: Although credit card growth in July was significant at 31%, it was lower than the growth of 36% observed in June.

One of the top financial firms, HSBC, presents an intriguing viewpoint on the credit growth statistics. When the HDFC merger is taken into account, according to HSBC's estimate, credit growth is a solid 20%, which is unquestionably good news. They do point out that SMEs, the corporate sector, and the retail sector have all had slower growth overall.

It's possible that this situation won't last long

According to HSBC, this might be a passing trend that won't likely last through the rest of the quarter. They haven't changed their year-end credit growth targets for banks, which are 13 percent, and for the entire credit system, which includes wholesale and NBFCs, which is 19 percent. This implies that they are not unduly concerned about the dip in credit growth that has occurred.

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