Services Sector Credit Grew by 29% in January 2024: Report

Service sector growth: The services sector witnessed a surge in credit growth by 28.9 per cent year-on-year in January 2024, a significant uptick from 21.4 per cent in the corresponding period last year. This growth was primarily driven by major segments such as NBFCs and trade, further boosted by a favourable base effect.

In contrast, banks' exposure to NBFCs experienced a deceleration, reaching Rs 15.0 lakh crore in January 2024, reflecting a 15.6 per cent year-on-year growth, nearly halving from the growth rate reported in January 2023. Despite this, the proportion of NBFC exposure relative to aggregate credit decreased marginally from 9.7 per cent to 9.4 per cent during the same period. The six-month average year-on-year expansion in bank advances to NBFCs also reduced to around 21 per cent, down from the previous average growth of approximately 28-30 per cent, attributed partly to increased risk weights and higher borrowings in the capital market.

The industry growth, albeit moderating to 8.3 per cent year-on-year in January 2024 from 8.6 per cent in December 2023, and 8.7 per cent in January 2023, was partially offset by the impact of the HDFC-HDFC Bank merger. Excluding the merger effect, growth would have been slower at 7.8 per cent. 

Within the infrastructure sector, credit growth varied across sub-segments. While telecommunications, railways (excluding Indian Rail), and other infrastructure segments reported faster growth compared to the previous year, the power and roads segments witnessed comparatively slower growth rates. Similarly, power-focused Infrastructure Finance Companies (IFCs), supported by government schemes and improved financial positions, have been steadily expanding their loan books, gradually increasing their share in exposure to the power sector.