Bank loans to India's technology infrastructure sector have doubled in two years, according to Reserve Bank of India (RBI) data reported by The Economic Times. Loans to services including software development, IT services and digital technology infrastructure rose 49% year on year to ₹53,859 crore at the end of June. These loans have increased from ₹26,667 crore recorded two years ago, representing a nearly 100% growth in the sector's credit demand. The growth reflects India's emergence as the leading global hub for data centers and inhouse capability facilities for Fortune 500 companies.
The loan growth from this segment has been robust in the last two years and is only beaten by the sharp growth in traditional sectors, such as advances to public finance institutions and loans against gold jewellery, as reported by The Economic Times. The rise of data centres, global capability centres (GCCs) and IT enabled services are reflecting in bank credit as loans to these segments are growing at a fast clip. Bankers indicate that these loans include IT services, server and cloud infrastructure costs, corporate acquisitions, data localisation compliance and cybersecurity upgrades. V R C Reddy, head of treasury at Karur Vysya Bank, stated that the trend of high credit to this segment is driven by expansion in digital infrastructure, noting that the sharp rise in computer software credit is driven by higher credit demand from firms supporting the expansion of data centres, hyperscalers and GCCs.
Madan Sabnavis, chief economist at Bank of Baroda, noted that the data could include investments made by companies under the IT services linked sectors, with possible investments in servers or data centres by companies classified under this heading. A senior public sector bank executive explained that the data would include mid tier IT companies which require fund based working capital and pre and post shipment credit, GCCs which are setting up and scaling up operations, and high end servers, data storage and startups which are also now part of the banking system. The sharp rise in computer software credit underscores the rapid growth of India's digital infrastructure ecosystem.
Bankers explained that software companies have traditionally been cash rich and have not been big borrowers from banks, but demand for credit is now coming from a variety of sources including startups, data centres or IT enabled services, as reported by The Economic Times. The ₹53,859 crore at the end of June represents just 0.87% of the total ₹61.53 lakh crore loan outstanding of the services sector under which these loans are classified. It is an insignificant part of the ₹217 lakh crore total non food bank credit.
