HomeBusinessCredit growth picks up  pace  on  year-end jump in demand

Credit growth picks up  pace  on  year-end jump in demand


Bank credit grew 8.7% from a year earlier as of 11 March, with retail loans continuing to witness the sharpest uptick, data from the Reserve Bank of India (RBI) showed.

According to bankers, there is typically a greater push for loans in the last three months of a fiscal as they look to meet year-end targets and borrowers utilize existing loan limits. While non-food credit stayed in the range of 5.4 -7.2% until November, it rose sharply in December to 9.3%, and the momentum continued in the next two months.

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Sharp uptick

Outstanding non-food credit stood at 116.5 trillion on 11 March, up 8.7% from the same period last year and 0.7% from the fortnight to 25 February. RBI releases data on credit and deposits every fortnight. On an absolute basis, outstanding credit has expanded by 79,482 crore between 25 February and 11 March.

Retail loans continued to grow faster than corporate loans, which stood at 31.8 trillion, up 12% from a year ago as of 28 January, while loans to industries were at 30.5 trillion, up 6.4%. The data on sectoral deployment of credit typically comes with a one-month lag.

Analysts at CareEdge Ratings (formerly Care Ratings) believe that the retail loan segment is expected to do well compared with industry and service segments.

“The ongoing Russia and Ukraine war is likely to have a limited impact on credit growth in India due to substantial liquidity available in the market,” it said in a report on 19 March, adding that while the third wave of covid-19 was not as severe as the first two, subsequent variants if severe could lead to lockdowns and slow down economic growth.

While mortgages remain a key driver of loan growth for banks, bankers said personal loans and small business loans are also inching up.

“Our discussions with banks as well as large direct selling agents suggest that retail credit disbursements have re-accelerated and are now trending even better than pre-covid levels, after some disruption in early January due to the third covid-19 wave and holidays in southern India,” analysts at Emkay Global Financial Services Ltd said in a report on 7 March.

Given the strong demand, banks can clock strong growth without relaxing lending norms, it said. Emkay analysts added that with better asset quality outcomes leading to lower risk averseness, banks have also accelerated disbursements to self-employed customers in retail and business loan categories, but mainly from sectors that were largely resilient during covid-19.

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