Credit Growth Slows to 17.4% in June 2024 Amid Weaker Industrial and Service Sectors

Credit growth in June 2024 fell to 17.4%, a drop from 20.8% in May, as reported by Anandrathi. This was attributed to a decrease in demand deposits and moderated time deposits. Despite weaker credit growth in various sectors, personal loans weakened with gold loans increasing due to high gold prices.

Credit growth in June 2024 fell sharply to 17.4%, down from 20.8% in the previous month, according to a report by Anandrathi. Over the past year, credit offtake expanded by Rs. 20.4 lakh crore, while deposits grew by Rs. 23.9 lakh crore. The report noted a significant drop in demand deposits and moderated growth in time deposits.

Interbank liquidity showed improvement from May, thanks to increased government spending. However, investment growth continued to stay below average for the sixth consecutive month. Credit growth across various sectors slowed in June after rising in May.

The industrial sector, excluding infrastructure, grew at 9.7%, but infrastructure growth dropped from 7.2% in May to 5.5% in June. The services sector saw its growth rate decline from 22.8% in May to 17.4% in June, and personal loans grew at 28.8% in May but fell to 25% in June. The agriculture sector's growth rate also decreased from 21.5% in May to 17.4% in June.

Despite the overall decline, gold loans saw an increase due to high gold prices. Net interest margins (NIMs) on outstanding loans rose slightly, with the Weighted Average Lending Rate (WALR) increasing to 2.98% from 2.94% in May. However, NIMs on new loans decreased due to falling lending rates.

The report expects NIMs to remain under pressure, but improvements in liquidity could be seen due to ongoing government spending and higher capital flows easing interbank liquidity stress.

(With inputs from agencies.)