Services sector credit growth dips sharply in February, shows RBI data

Retail growth moderates on slump in unsecured credit

The pace of bank credit to the services sector declined sharply to 13 per cent on a year-on-year (Y-o-Y) basis in the fortnight ended February 21, 2025, from 21.4 per cent a year ago. The slowdown was driven by a slump in loans to non-banking finance companies (NBFCs) and transport operators, Reserve Bank of India (RBI) data showed.

 

Loans to NBFCs grew by just 6.4 per cent Y-o-Y as on February 21, 2025, down from 14.7 per cent on February 23, 2024. Banks scaled down their lending to NBFCs after the RBI hiked the risk weights on such exposure, signalling its concern over elevated growth and associated risks, bankers said.

 

Credit to transport operators showed 13.1 per cent growth in February 2025, down from 23.6 per cent growth a year ago. Credit growth remained robust in the ‘professional services’ and ‘trade’ segments, the RBI said in a statement.

 

Non-food bank credit expanded by 12 per cent Y-o-Y in February 2025 as against 16.6 per cent in the corresponding fortnight in 2024.

 

Credit to the retail loans segment registered growth of 14.0 per cent, down from 18.0 per cent a year ago, largely due to a decline in the growth rate in ‘other personal loans’, ‘credit card outstanding’ and ‘vehicle loans’ segments. The slowdown reflects the impact of a hike in risk weights in November 2023 for exposure to unsecured credit, following signs of rising stress in small-ticket loans, bankers added.

 

Credit to industry recorded growth of 7.3 per cent in the fortnight ended February 21, 2025, compared with 8.4 per cent a year ago. Among major industries, outstanding credit to petroleum, coal products and all engineering, construction, and ‘paper & paper products’ recorded accelerated Y-o-Y growth, the RBI said.

 

Credit to agriculture and allied activities also slowed to 11.4 per cent in February 2025 from 20.0 per cent in February 2024, it added.