Tag: banking industry

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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Huge slowdown in credit offtake a cause of concern for banking industry: SBI DMD

Banking & Finance

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The the huge slowdown in credit offtake is worrying banking sector with growth in hit due to lack of investments from the private sector and low capital expenditure by corporates, said VS Radhakrishnan, Deputy Managing Director at State Bank of India.

Deposit growth has been close to 10 per cent in May 2021 as customers opt for savings rather than consumption.

Also read: Talcher Fertilizers secures ₹9,560 crore loan from SBI-led consortium for coal gasification

“The slowdown in credit growth has been at around 5.3 per cent in FY21, the lowest in the last three-four years. It is a matter of serious concern. Private sector is seeing a huge slowdown in fresh capex commitment and large corporates have gone in a big way deleveraging themselves,” Radhakrishnan said at a webinar on outlook on the economy due to Covid surge and impact on the banking sector, organised by the Merchants’ Chamber of Commerce & Industry.

Weak consumer sentiment

Consumer sentiment is weak and gearing for medical expenses due to pandemic worries has pushed people avoid spending, and this has hit demand.

“People are in a wait-and-watch-mode. Credit offtake can happen only when investment cycles come back and that can happen only when confidence comes back and private investments will follow when confidence returns,” he said.

However, once the economy bounces back, government starts investing in infrastructure and private sector gets back its confidence to invest, credit offtake will start improving in the next three-to-six months. “Both Central and State governments should try to boost consumption by taking liberal view on the fiscal front. The gradual unwinding of lockdown and a larger vaccination drive will help us recover from the lows of Covid-19,” he said.

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NITI Aayog to finalise names of 2 public sector banks for privatisation soon, BFSI News, ET BFSI

Banking & Finance

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Government think-tank NITI Aayog, in consultation with the Finance Ministry, has started deliberations to finalise the names of two public sector banks that will be privatised in the current fiscal as part of the disinvestment process. NITI Aayog has been entrusted with the task of selection of names of two public sector banks and one general insurance company for the privatisation as announced in the Budget 2021-22.

The work in this respect is going on, sources said, adding, a couple of meetings have been convened by the NITI Aayog on the subject.

There are various aspects that have to be looked into including regulatory issues, HR management, financial health etc before reaching a conclusion, sources added.

Once NITI Aayog makes its recommendations, it will be vetted by the Core Group of Secretaries on Disinvestment headed by Cabinet Secretary.

The other members of the high-level panel are Economic Affairs Secretary, Revenue Secretary, Expenditure Secretary, Corporate Affairs Secretary, Secretary Legal Affairs, Secretary Department of Public Enterprises, Secretary Department of Investment and Public Asset Management (DIPAM) and the Secretary of administrative department.

Following clearance from the Core Group of Secretaries, the finalised names will go to Alternative Mechanism (AM) for its approval and eventually to the Cabinet headed by the Prime Minister for the final nod.

Changes on the regulatory side to facilitate privatisation would start after the Cabinet approval.

Last month, Finance Minister Nirmala Sitharaman had said “interests of workers of banks which are likely to be privatised will absolutely be protected whether their salaries or scale or pension all will be taken care of.”

Explaining the rationale behind the privatisation, Sitharaman had said that banks in the country needed to be bigger, just like the State Bank of India (SBI).

“We need banks which are going to be able to scale up… We want banks that are going to be able to meet the aspirational needs of this country,” Sitharaman had said, adding that a lot of thought had gone behind the intention to privatise some public sector banks.

Meanwhile, banking sector regulator RBI also said it is in discussion with the government over the privatisation of public sector banks.

The government has budgeted Rs 1.75 lakh crore from stake sale in public sector companies and financial institutions, including 2 PSU banks and one insurance company, during the current financial year. The amount is lower than the record budgeted Rs 2.10 lakh crore to be raised from CPSE disinvestment in the last fiscal.



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