Tag: bank credit

Bank credit to industry revives, but real estate, education loans lag

Banking & Finance

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Among industries, a large portion of credit is accounted for by the larger corporates.

By Piyush Shukla

Even as bank credit to industry, which comprises 29.3% of total non-food industry credit, showed some signs of an uptick with 4.1% year-on-year rise in October, data from the Reserve Bank of India’s sectoral credit deployment shows that credit towards commercial real estate and education loans has shrunk by 0.5% and 8.7% on year, respectively.

“Banks have been following a cautious stance in underwriting over past one year owing to Covid impact and focus has been more on secured retail and working capital loans to highly rated borrowers. While banks have actively pursued stronger growth in mortgage and even in LAP (long against property) segments, they have maintained a strong control on their commercial real estate exposure in order to reduce asset quality risks given uncertain economic environment,” said Nitin Aggarwal, vice president, research-banking sector at Motilal Oswal Financial Services.

According to RBI’s data, credit to industry sector increased 4.1% on year to Rs 28,54,571 crore as on October 22. On the other hand, loans to commercial real estate fell 0.5% on year to Rs 2,53,582 crore while education loans credit deployment by banks by 8.7% to Rs 47,260 crore.

Among industries, a large portion of credit is accounted for by the larger corporates. Data shows that while bank credit to micro and small industries grew 11.9% year-on-year and loans to medium-sized industries grew 48.6% in percentage terms over the last year, advances to large corporates remained flat registering 0.5% year-on-year rise at Rs 22,70,350 crore as on October 22.

“Loan demand to industry has recovered to 4% year-on-year versus -0.7% at this time last year. This has been led by a healthy revival in micro, small and medium enterprises and to some extent has also been aided by the ECLGS (Emergency Credit Line Guarantee Scheme) disbursements made earlier. However, the growth from large industry still remains muted at 0.5% on year though capacity utilisations are improving and banks are expecting the corporate demand to recover in coming quarters led by gradual revival in capex cycle,” Aggarwal added.

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Non-food bank credit growth accelerates to 6.9% in October

Banking & Finance

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Non-food bank credit growth accelerated to 6.9 per cent in October 2021 as compared to 5.2 per cent in October 2020, according to the Reserve Bank of India’s data on sectoral deployment of bank credit.

Agri sector sees accelerated growth

Non-food bank credit growth was propelled by credit to agriculture and allied activities, industry and personal loans. A slowdown in credit growth to services continued.

RBI observed that credit to agriculture and allied activities continued to perform well, registering an accelerated growth of 10.2 per cent in October 2021 as compared to 7.2 per cent in October 2020.

Also see: Unwise to place a ban on private crypto assets: Report

Credit growth to industry picked up to 4.1 per cent in October 2021 from a contraction of 0.7 per cent in October 2020.

Credit to industries

Within industry, credit to medium industries registered a robust growth of 48.6 per cent in October 2021 as compared to 20.8 per cent last year. Credit to micro and small industries accelerated to 11.9 per cent in October 2021 from 0.7 per cent a year ago. Credit growth to large industries stood at 0.5 per cent in October 2021 as compared to a contraction of 1.8 per cent a year ago.

Credit growth of services decelerated to 2.9. per cent in October 2021 from 8.6 per cent a year ago.

Personal loans continued to grow at a robust rate of 11.7 per cent in October 2021 vis-a-vis 8.7 per cent in October 2020, primarily due to housing, vehicle loans and loans against gold jewellery.

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RBI, BFSI News, ET BFSI

Banking & Finance

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In the fortnight ended November 6, 2020, bank loans stood at Rs 104.19 lakh crore and deposits at Rs 144.03 lakh crore, according to the RBI‘s Scheduled Banks’ Statement of Position in India as on November 5, 2021, data released on Wednesday.

In the previous fortnight ended October 22, 2021, bank credit had grown by 6.84 per cent and deposits by 9.94 per cent. In FY2020-21, bank credit had risen by 5.56 per cent and deposits by 11.4 per cent.

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Mid-size firms, retail lead the charge in credit rebound, BFSI News, ET BFSI

Personal Finance

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Indian lenders are beginning to see a pick-up in loan demand, with medium-sized firms and retail clients at the vanguard of a visible credit rebound.

Bank credit rose 6.8% in October, compared with 5.1% in the same period a year ago, show the latest figures published by the Reserve Bank of India (RBI).

Outstanding credit amounted to ₹110.5 lakh crore as of October 22, up ₹7 lakh crore in a year.

The pick-up is largely due to the push from government schemes even as large corporates and top rated borrowers continue to rely on capital markets and overseas money hubs where they manage to raise funds at much cheaper rates. India’s weighted average lending rates were at 7.2% in September, according to RBI data.

At the same time, the average rates for triple-A rated five-year corporate bonds were at 6% and at 5.29% for three-year maturity, show Bloomberg data compiled by ETIG.

The latest data on sectoral flow of credit offtake show that lending to medium-sized firms rose 49% year-on-year to ₹1.75 lakh crore as of end September compared with the same period a year ago.

Much of the lending is reckoned to be under the government’s Emergency Credit Line Guarantee Scheme (ECLGS) MSME sector, under which the government provides 100% guarantee to banks in respect of eligible credit facilities extended by it to its borrowers.

In addition, consumer durable loans have risen by 40% compared with 14.9% in the same period a year ago, with borrowers taking advantage of the reduced interest rates. With the government’s renewed thrust on the social sector, lending to infrastructure more than doubled to ₹1,323 crore in September from ₹1,081 crore a year ago.

On the liability side, the pace of deposit pick-up has slowed marginally to 9.9%. But deposit growth still continues to outpace credit growth.

In absolute terms, banks raised almost double the amount of deposits at ₹14 lakh crore than the amount they lent during the period.



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Bank credit grows 6.48%; deposit by 10.16%, BFSI News, ET BFSI

Banking & Finance

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Mumbai, Bank credit grew by 6.48 per cent to Rs 110.13 lakh crore and deposit by 10.16 per cent to Rs 157.56 lakh crore in the fortnight ended October 8, RBI data showed. In the year-ago fortnight ended October 9, bank advances were at Rs 103.43 lakh crore, and deposits were at Rs 143.02 lakh crore, according to RBI’s Scheduled Banks’ Statement of Position in India as on October 8, 2021 data, released on Thursday.

In the previous fortnight ended September 24, 2021, bank credit had grown by 6.67 per cent and deposit by 9.34 per cent.

In FY2020-21, bank credit had grown by 5.56 per cent and deposit by 11.4 per cent.

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Bank credit gathers pace in Aug 2020, led by retail, industrial sectors, BFSI News, ET BFSI

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As India‘s economic activity revives, bank credit has expanded to various sectors, led by retail and industrial sectors, in August 2021.

According to the Reserve Bank of India data, retail segment showed an accelerated growth of 12.1% in August 2021, compared with 8.5 % a year ago, on higher volume in housing and vehicle credit.

However, credit growth in services sector fell to 3.5% in August 2021 compared with 10.9% a year ago, mainly due to contraction in credit growth to NBFCs and commercial real estate.

Credit to industry rose to 2.3% in August 2021, from 0.4% in August 2020. Loans to medium size units rose to 63.4% in August 2021 against 4.4% last year, RBI said.

Credit to micro and small industries stood at 10.1% in August 2021, from a contraction of 1.1% a year ago, and credit to large industries shrunk by 1.7% in August 2021 compared with a growth of 0.5% a year ago.

Credit to engineering, chemical and chemical products, gems and jewellery, infrastructure, mining and quarrying accelerated in August 2021 as against a year ago, and credit to basic metal, cement & cement products, construction, vehicles, vehicles parts and transport equipment’ either decelerated or contracted, RBI said.



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RBI study, BFSI News, ET BFSI

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The uptick in the credit growth in the recent months notwithstanding the second COVID-19 wave augurs well for the economy, said an article published in the RBI’s latest bulletin. Bank credit growth has witnessed significant fluctuations in the past one and a half decades.

The period between 2007-08 and 2013-14 could be characterised as a bank credit boom period in the Indian economy, as non-food credit registered double-digit growth, primarily driven by robust credit growth to the industrial sector, the article said.

“Both dominant-group and other-group of banks lent aggressively to the industrial as well as other sectors,” it said adding that within industries, infrastructure, and basic metal and metal product industries accounted for a major portion of credit offtake from both the bank groups during the credit boom period.

Thereafter, however, the credit cycle reversed along with a shift in the sectoral deployment of bank credit.

The article said that during 2014-15 to 2020-21, overall credit growth decelerated, primarily driven down by a reversal in credit growth to the industrial sector.

The overall non-food credit growth during 2014-15 to 2020-21 was almost entirely driven by the expansion of credit to the non-industrial sectors, particularly lending to the retail segment in the form of personal loans.

Active participation of both the dominant-group and the other-group of banks is driving credit growth to the non-industrial sectors, the article said.

The sharp slowdown in industrial credit warrants attention and steps to step up credit offtake commensurate with appropriate risk-taking, a number of which have already been taken by the government and the RBI, could de-freeze the credit market for the industrial sector. It can help in reviving the growth momentum derailed by the COVID-19 pandemic, it said.

“After witnessing a significant slowdown in credit offtake during 2019-20 and 2020-21, there has been some uptick in credit growth in the recent months notwithstanding the second COVID-19 wave, which augurs well for the economy,” the article said.

Another article published in the bulletin titled ‘Private Corporate Investment: Growth in 2020-21 and Outlook for 2021-22′ said the investment intentions of the Indian private corporates remained sluggish as reflected by lower numbers of new announcements and completions of projects.

The article highlighted that the pandemic uncertainties adversely impacted appetite for new projects during 2020-21 and posed impediments to the timely completion of pipeline projects.

In 2021-22, demand for new projects would shape the private investment outlook, along with the progress of the projects already in the pipeline, it added.

The central bank, however, said the views in the articles are of the authors and do not represent the views of the Reserve Bank of India.



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Finance minister, BFSI News, ET BFSI

Personal Finance

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MUMBAI: Union finance minister Nirmala Sitharaman on Wednesday said it is too early to say if there is a lack of demand for credit and announced a district-wise outreach to be undertaken by banks to help credit growth from October.

A push to credit growth from such outreach efforts will also help the momentum set by the stimulus packages, which have been extended by the government since the onset of the pandemic.

It can be noted that in late 2019, banks had conducted the “loan melas” in 400 districts to push up sagging credit growth. Even now, the credit growth is stuttering at around 6 per cent.

“I think it is too early to conclude whether there is a lack of demand… I don’t think it is time yet to conclude that there is no credit pick-up. Even without awaiting indications, we have taken steps to ramp up credit,” Sitharaman told reporters here.

She noted that over Rs 4.94 lakh crore was disbursed by the banks between October 2019 and March 2021 through the outreach initiatives undertaken by them.

“This year too sometime in October, there will be a credit outreach in every district of the country,” she said.

Sitharaman added that the government had announced that credit up to Rs 1.5 lakh will be given to borrowers through NBFC-MFIs.

“In order to keep up the momentum of stimulus that we are periodically giving, we have also asked banks to go out and give credit,” she said.

Meanwhile, Sitharaman said there is a need to ramp up credit growth in the eastern pockets of the country in states like Jharkhand, West Bengal, and Odisha, where the populations are displaying a higher propensity to deposit money in current and savings accounts.

Banks have also been asked to create state-wise plans for northeastern states to help the logistics sector and exporters.

Apart from that, Sitharaman, who took a review meeting with the chiefs of all the 12 state-run lenders, said banks have been asked to reach out to exporters at the district level to help push the “one district, one export” message of Prime Minister Narendra Modi.

Besides, the finance minister said banks have also been asked to look into the demands of the fintech sector.



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FM asks banks to work with state govts to push ‘one district, one product’ agenda

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Finance Minister Nirmala Sitharaman on Wednesday said she has requested banks to work with all state governments to push the ‘one district, one product’ agenda.

Banks have also been requested to interact with export promotion agencies, chambers of commerce and industry to understand and address the requirement of exporters on time, Sitharaman said while addressing media here on Wednesday.

The Finance Minister, who is on a two-day visit to the financial capital, said there should be some simple approach between public sector banks so that exporters are not made to run between one bank to another, scouting for a better offer.

During the day, she met heads of public sector banks (PSBs) to review their financial performance.

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