Non-food credit growth hit a 31-month high of 10.24% year-on-year (year-on-year) in the fortnight ending April 8, from 8.71% in the previous fortnight, according to data released by the Reserve Bank of India (RBI).
The first impression of double-digit growth in more than two years comes at a time when banks are showing early signs of a recovery in demand for capex, while demand for retail loans continues to hold up. High commodity prices are also helping to induce companies to borrow more.
Outstanding non-food credit as of April 8 rose to 119.48 trillion rupees from 118.36 trillion rupees at the end of the previous fortnight. The growth rate of deposits was lower than that of credit, standing at just over 10% year-on-year during the fortnight under review, but above 8.94% during the previous fortnight. The value of deposits with the banking system stood at 167.42 trillion rupees as of April 8.
Credit to retail borrowers continues to be the most important driver of credit growth. According to industry data released by the RBI, retail loans grew by 12.4% in March 2022, compared to 10.7% in March 2021. Meanwhile, loan growth in the industrial segment picked up to 7 .1% in March 2022 after a contraction of 0.4% in March 2021.
Bankers say corporate demand is returning, with green shoots visible in some segments. Samuel Joseph, Deputy Managing Director, IDBI Bank, said many projects are at the drawing board stage and are expected to take off in FY23. “Some of the approvals have already been granted for various PLI programs of the government and they have not yet reached the financing stage. But, this year, in the first or second quarter, some of these projects should arrive,” he said.
Funding for some flagship projects, such as Navi Mumbai International Airport and the Coastal Road, has already been blocked in the fourth quarter. A few more are expected to be in the pipeline.
Rising input costs, especially coal, in light of the wartime situation led some highly rated companies to use their working capital limits and even seek increased limits, Joseph said. .
CareEdge Ratings analysts said improving credit growth is being driven by retail lending, an increase in working capital needs due to higher inflation, a weak base effect and the lifting of capital by some companies from the banking system instead of the bond market due to attractive rates.
“After experiencing modest credit growth in recent years, the outlook for bank credit growth is expected to remain positive due to economic expansion, increased public and private investment spending, expanded support ECLGS, rising commodity prices and the surge in retail credit,” the rating agency said. said in a report Monday.
Most banks are also forecasting double-digit loan growth for FY23.