Credit growth picks up as demand surges late in the year

Bombay : Bank lending rose 8.7% year-on-year as of March 11, with retail lending continuing to register the biggest gain, according to data from the Reserve Bank of India (RBI).

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

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Sharp rise

Outstanding non-food credit amounted to 116.5 trillion on March 11, up 8.7% from the same period last year and 0.7% from the fortnight to February 25. RBI releases credit and deposit data fortnightly. In absolute terms, outstanding loans increased by 79,482 crores between February 25 and March 11.

Personal loans continued to grow faster than business loans, which stood at 31.8 trillion, up 12% from a year ago on January 28, when loans to industries were at 30.5 trillion, up 6.4%. Data on sectoral credit deployment are generally presented with a one-month lag.

CareEdge Ratings (formerly Care Ratings) analysts believe that the retail lending segment should perform well against the industrial and service segments.

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

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

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

Given the strong demand, banks can register strong growth without easing lending standards, he said. Emkay analysts added that with better asset quality results leading to lower risk aversion, banks have also accelerated disbursements to independent clients in the retail and corporate lending categories, but mainly in sectors that have largely resisted during covid-19.

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