Tag: loans

HDFC Bank, ICICI, Axis retail loan recast thrice corporate ones, BFSI News, ET BFSI

Banking & Finance

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It was not corporates but retail borrowers who rushed to avail the debt recast scheme announced by the Reserve Bank of India to alleviate pandemic stress last year.

Retail loan restructuring by top three private banks, HDFC Bank, ICICI Bank and Axis Bank, at Rs 6,600 crore, was three times the Rs 2,100 crore restructured loans by corporates, according to a report.

However, while the retail loan restructuring ended by March 31, corporate loan recasts are allowed till June end.

Fresh concerns

With a fresh surge in Covid infections and subsequent lockdowns, lenders are staring at renewed stress in loan accounts.

Sameer Narang, Chief Economist of Bank of Baroda, recently told ETBFSI that the salaried segment is still alright but the informal sector will be impacted. “Banks may not be that impacted as banks do not cater the informal sector in a big way as NBFCs does. There will be an impact on NBFCs, and they would require some degree of support. It also depends upon the pace of the second wave. We should wait and see how things pan out. If it is a phenomenon for 6-8 weeks then most of the segments will ride it over. If it lasts longer then this might be an issue for segments. It is very difficult to create a policy in an uncertain environment.”

Asset quality

HDFC Bank, ICICI, Axis retail loan recast thrice corporate ones

Ratings agency Icra too had raised concerns over the asset quality of retail loans.

The rising Covid cases have again raised concerns on the asset quality of retail loans from non-banking financial companies (NBFCs) and housing finance companies (HFCs), according to investment information agency ICRA.

The restrictions on movement will have a bearing on the collection efforts of NBFCs especially for microfinance loans where cash collections still remain dominant, it said in a report.

Commercial vehicle loans can also face stress if the inter-state restrictions are re-imposed, though even the current restrictions put in place in key geographies like Maharashtra and Delhi where non-essential services are closed will lead to lower fleet utilisation for operators.

However, said ICRA, housing loans are expected to remain most resilient as was seen even last year given the secured nature of asset class and priority given by borrowers to repay them.

No relief measures

Banks, which got protection and support by a swift moratorium on loans when the pandemic first struck, have no such cover this time.

As the second wave intensifies, most of the relief measures and schemes announced by the government and Reserve Bank of India have expired. On top of it, the central bank is non-committal on moratoriums.
“In today’s conditions, there is no need for a moratorium,” RBI governor Shaktikanta Das had said after the central bank’s monetary policy review.

Also, a spike in overdue loans after the lifting of the moratorium has been worrying analysts.

“The level of loans in overdue categories has increased after the moratorium has been lifted and the impact on asset quality will be spread over FY2021 and FY2022 as various interventions and relief measures have prevented a large one-time hit on profitability and capital of banks,” Icra said in a report.

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Lenders to approve the transfer of 30-40 loans by next week, BFSI News, ET BFSI

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The Indian Banks’ Association (IBA) has identified 102 corporate bad loans, totalling to Rs 2 lakh crore, where the amount outstanding in each is over Rs 500 crore that can be transferred to the proposed National Asset Reconstruction company (NARC) or bad bank.

It has asked its member banks asked members to identify large loans where they are lead bankers and get approval from co-lenders so that these loans can be sold to a National Asset Reconstruction company.

The loans identified by IBA include NPAs in a variety of industries — including oil, steel, cement and roads, with many admitted under the insolvency process. These loans are almost fully provided for over the years and they exclude the ones where there is fraud involved or those currently under liquidation. About 75% of the lenders by value need to approve to transfer the loans to an ARC.

The process

In the first phase, lenders are expected to approve the transfer of 30-40 loans by next week for transferring the loans from the books of banks is already in place.

Once the lenders decide on selling the loan, the NARC will make them an offer based on the scope of recovery. With the NARC’s offer on hand, the lenders will hold a ‘Swiss Challenge’, where rivals are allowed to better the offer made by a chosen bidder.

While rival in the private sector will be given an option to bid, it is unlikely they will succeed. This is because the security receipts issued by the NARC for 85% of the value of the loans would be guaranteed by the government. Since private companies do not have a government guarantee, they can only hope to win if they can provide cash. The Swiss Challenge will enable the public sector banks to comply with RBI’s norms that require banks to sell loans through a price-discovery process rather than doing a one-to-one deal.

The NARC will pay up to 15% of the agreed value for the loans in cash. The bad bank is also expected to do a good job in recovery as it will create a trust that will assign the task to an asset management company (AMC) in the private sector.

Each corporate nonperforming asset (NPA) will be converted into a special purpose vehicle, which will be sold by the AMC.

The bad bank

Nine banks and two non-bank lenders, including the State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB), are coming together to jointly invest Rs 7,000 crore of initial capital in a proposed bad bank that aims to help extract funds stuck in bad loans. Two other state-run financiers of power projects will also own stock in the bad bank.

Canara Bank, Union Bank of India and Bank of India will join their larger state-run peers as investors in the bad bank. ICICI Bank, Axis Bank and Life Insurance Corp of India-owned IDBI Bank are also among the shareholders. State-owned Power Finance Corp and Rural Electrification Corp will also be equal shareholders in the new company.

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Goldman Sachs, BFSI News, ET BFSI

Banking & Finance

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Bandhan Bank reported a steady improvement in collection efficiency to 96% in March’21 while it has not seen any major surge in top-up loans. The improvement in collection efficiency for the microfinance sector is 95% in March versus 90% in January.

“Bandhan has declared its top-up loans for a cumulative amount of Rs 3,300 crore and, based on ALM maturity data and industry checks, we estimate it has extended government guaranteed loans of about Rs 2,000 crore over 1Q-3QFY21, which together would be roughly 14% of quarterly repayment over that same time frame as well as 11.4% of quarterly disbursements (over 1Q-3QFY21),” Goldman analysts wrote in a note. Based on company data, it appears the residual maturity of the loan portfolio (ex housing) has been consistent with the past, subject to some minor changes in the maturity buckets towards longer duration, it said.

Since 1QFY19, Bandhan has collected Rs 10,300 crore on a quarterly basis, and disbursed Rs 12,700 crore (in loans excluding mortgages) quarterly. On average, ECLGS and top-up loans accounted for 14 percent of quarterly repayments over the last three quarters and 11.4 percent of quarterly disbursements (over 1Q-3QFY21).

According to loan maturity data, approximately 30% of MFI loans are collected every three months, implying an average term of nine months. The length of loans has elongated slightly over the last three quarters, with loans of more than one year duration rising by 100 bps, owing to the use of ECLGS loans, and the RBI’s moratorium, which was in effect until August.

Industry peers and Assam

Strong and long vintage client relationships have been helping Bandhan’s collection efficiency compared to other banks/MFI players, which are 10-15 percentage point lower in terms of collection efficiency.

On the Assam loan book, Goldman Sachs said Bandhan witnessed nearly 400,000 additions in the number of new loan accounts — one of the highest among banks. Bandhan’s deposit business grew 16 percent /24 percent in 2Q/3QFY21, compared to 3 percent /4 percent for other major banks, and it now has a deposit market share of 1.3 percent in Assam. Within advances, Bandhan’s credit grew 6 percent /3 percent in 2Q/3QFY21, compared to 8 percent /6 percent for other major banks, and its market share was 9.4 percent as of December 2020.

The road ahead

Bandhan’s growth over 2Q-3QFY21 came primarily from urban areas, whereas incremental advances were driven by rural areas, which shows a distinction between the deposit and loans market composition for Bandhan Bank. Other banks’ ECLGS portfolios ranged from 5-23 percent of their loan books, whereas Bandhan’s is about 4 percent of total loans.

With surging Covid cases across India, Bandhan could potentially witness headwinds to its asset quality in the near term, Goldman Sachs estimates the Rs 74,00 crore of slippages over 4QFY21 -FY22, translating to 9% of FY21 total loans (v/s 7% of 3Q loans).

According to Goldman Sachs, Bandhan will be able to leverage its strong customer relationships and market share leadership to navigate through near-term headwinds with a manageable effect and deliver a 15 percent return on equity in FY21 25% RoE in FY22.

Goldman remains bullish on Bandhan Bank based on its improving liability franchise and healthy pricing power as evidenced by its favourable cost of deposit, and superior return ratios. Downside risks include any sharp increase in virus cases, slippages in strategy execution, or any disruption in home markets, especially MFI customer acquisition or liability buildouts.



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Banks want debt recast scheme back as Covid wave intensifies, BFSI News, ET BFSI

Banking & Finance

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Banks have sought an extension of one-time debt recast scheme as the curbs after fresh Covid wave are likely to increase defaults and affect asset quality.

The bank chiefs have petitioned RBI to extend the scheme introduced last year in a meeting with the governor earlier this week, according to reports.

No relief measures

Banks, which got protection and support by a swift moratorium on loans when the pandemic first struck, have no such cover this time.

As the second wave intensifies, most of the relief measures and schemes announced by the government and Reserve Bank of India have expired. On top of it, the central bank is non-committal on moratoriums.

In today’s conditions, there is no need for a moratoriumRBI governor Shaktikanta Das

Also, a spike in overdue loans after the lifting of the moratorium has been worrying analysts.

“The level of loans in overdue categories has increased after the moratorium has been lifted and the impact on asset quality will be spread over FY2021 and FY2022 as various interventions and relief measures have prevented a large one-time hit on profitability and capital of banks,” ratings agency Icra said in a report.

What Fitch says

Banks want debt recast scheme back as Covid wave intensifies

India’s second wave of Covid infections poses increased risks for India’s fragile economic recovery and its banks, says Fitch Ratings. It already expects a moderately worse environment for the Indian banking sector in 2021, but headwinds would intensify should rising infections and follow-up measures to contain the virus further affect business and economic activity.

Fitch forecasts India’s real GDP growth at 12.8% for the financial year ending March 2022 (FY22). This incorporates expectations of a slowdown in 2Q21 due to the flareup in new coronavirus cases but the rising pace of infections poses renewed risks to the forecast. Over 80% of the new infections are in six prominent states, which combined account for roughly 45% of total banking sector loans. Any further disruption in economic activity in these states would pose a setback for fragile business sentiment, even though a stringent pan-India lockdown like the one in 2020 is unlikely.

Challenging environment

The operating environment for banks will most likely remain challenging against this backdrop. This second wave could dent the sluggish recovery in consumer and corporate confidence, and further suppress banks’ prospects for new business (9MFY21 credit growth: +4.5% as per Fitch’s estimate), it said. There are also asset quality concerns since banks’ financial results are yet to fully factor in the first wave’s impact and the stringent 2020 lockdown due to the forbearances in place. We consider the micro, small and medium enterprises (MSME) and retail loans to be most at risk, the rating agency said.

Retail loans have been performing better than our expectations but might see increased stress if renewed restrictions impinge further on individual incomes and savings. MSMEs, however, benefited from state-guaranteed refinancing schemes that prevented stressed exposures from souring.

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Banks are without a raft in Covid storm, BFSI News, ET BFSI

Banking & Finance

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Banks, which got protection and support by a swift moratorium on loans when the pandemic first struck, have no such cover this time.

As the second wave intensifies, most of the relief measures and schemes announced by the government and Reserve Bank of India have expired. On top of it, the central bank is non-committal on moratoriums.

“In today’s conditions, there is no need for a moratorium”RBI governor Shaktikanta Das

Also, a spike in overdue loans after the lifting of the moratorium has been worrying analysts.“The level of loans in overdue categories has increased after the moratorium has been lifted and the impact on asset quality will be spread over FY2021 and FY2022 as various interventions and relief measures have prevented a large one-time hit on profitability and capital of banks,” ratings agency Icra said in a report.

No standstill

Banks enjoyed a standstill on classifying loans as non-performing last fiscal and also accounted for interest accrued despite not receiving payments during the quarter. Both these leeways will no longer be available after the final SC order in March.

As a result, bank NPAs are likely to spike and they may have to reverse some interest earned on loan accounts above Rs 2 crore as the SC order has directed banks to charge simple and not compound interest on loans between March and August 2020.

It is estimated that banks could face a hit of between Rs 7,000 crore to Rs 10,000 crore due to the reversal of interest as it is unclear whether the government will reimburse this waiver – as it earlier did for small-ticket advances.

Analysts will watch out whether banks will provide for the write-back on compounded interest as directed by the ape court or adjust it through their Covid 19 provisions already accounted for.

Fourth quarter

The banking sector had got back to some sense of normalcy in the fourth quarter as collection efficiency came close to or at pre-Covid levels and loan growth recovered.

However, a resurgence in Covid cases, leading to localised lockdowns in various states will force banks to look out for risk mitigation.

There is a likelihood of delayed recovery in credit offtake after the Covid spike. Analysts expect the banking sector loan growth to recover to 6% to 7% in the fiscal ending March 2021 mainly due to a growth in retail loans in the second half of the year. Large lenders with a wider network are expected to clock in a higher year on year increase with a double-digit increase in credit growth.

While banks may not have any impact on margins as they have not cut deposit or MCLR based rate, higher liquidity on the balance sheet could decline. Treasury income may also drop on sequential basis as 10-year Gsec has risen by about 28 basis points during the quarter.

The silver lining

The only respite for banks is their gross non-performing assets may not jump as estimated by RBI’s fiscal stability report.

Icra sees the NPA ratio at 9.5-9.7% as of March-end, lower than RBI’s estimate of 12.5% for the same period.
The RBI’s Financial Stability Report (FSR) of December 2020 has stated that banks’ gross non-performing assets (GNPAs) may rise sharply to 13.5 per cent by September 2021, and escalate to 14.8 per cent, nearly double the 7.5 per cent in the same period of 2019-20, under the severe stress scenario.

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Kotak Mahindra Bank customers can pay overdue EMI through payment app

Banking & Finance

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Kotak Mahindra Bank customers can now pay a missed EMI or an overdue loan instalment using any payment app such as Google Pay, PhonePe, Paytm.

“Kotak Loans is now live on the Bharat Bill Payment System (BBPS) platform and customers have to simply choose ‘Kotak Mahindra Bank Loan’ as the biller name on the payment app of their choice,” the private sector lender said in a statement on Saturday, adding that details of any EMIs that are past the due date will be displayed and the payment will reflect in the customer’s loan account on a real-time basis.

“This repayment facility is available on all KMBL terms loans such as Personal Loan, Home Loan, Consumer Durable Loan, Business Loan, Gold Loan, Loan against Property as well as Commercial Vehicle Loan, Tractor Finance Loan, Construction Equipment Loan,” it further said.

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NABARD Tamil Nadu region aims ₹40,000 crore loan disbursals in FY22

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Our Bureau

The National Bank for Agriculture and Rural Development (NABARD) Tamil Nadu region is planning to make ₹40,000 crore of loan disbursal in FY22, according to a senior official of the development bank.

During FY21, loans disbursed by Tamil Nadu Regional Office of the NABARD reached an all-time high of ₹27,104 crore, nearly doubling from ₹14,458 crore disbursed the previous year.

“In FY21, our loan disbursal grew by 87per cent to ₹27,104 crore. If the same level of growth sustains and co-operation from all stakeholders continues, we are confident of disbursing loans worth ₹40,000 crore in FY22,” S Selvaraj, Chief General Manager, NABARD, Tamil Nadu Region said here on Thursday.

He was addressing a press conference in the city to highlight the milestone achieved by NABARD Tamil Nadu region.

Also read: Nabard staff strike on March 30, seek pension updation

Selvaraj said that the growth in loan disbursement of NABARD Tamil Nadu region is higher than the national growth rate and also assumes significance as it came during the pandemic-hit year.

“This growth (in disbursements) is really remarkable since office functioning were severely impacted during the first five months due to Covid-19,” Selvaraj said, adding, “The support from Tamil Nadu government and government institutions and from stakeholders such as commercial banks, co-operative banks, NBFC-MFIs, selfless work and dedication by NABARD officials and transparent and simplified procedures at NABARD are the major reasons that enabled this robust growth.”

At pan-India level, Loans and advances of NABARD grew by 25 per cent to to ₹6.03-lakh crore in FY21 as against ₹4.81-lakh crore in the previous year.

Of the total disbursement in Tamil Nadu during FY21, refinancing of loans to eligible financial institutions increased by 89 per cent to ₹23,062 crore while support for rural infrastructure stood at ₹4,042 crore. The development bank also extended a grant assistance of ₹31 crore to various innovative projects to Agri and allied sectors.

Also read: CAG seeks details of performance audit of public sector banks recapitalisation

Of the total refinancing, Cooperative banks accounted for a major share at ₹8,761 crore (38 per cent) followed by Commercial Banks (₹6,602 crore), Regional Rural Banks (RRBs) – ₹4,840 crore and NBFC / NBFC-MFIs at ₹2,858 crore.

The ratio between loan refinancing and rural infrastructure support stood 85-15 per cent in FY21. Selvaraj said in FY22, the share of rural infrastructure may go up to 25 per cent as per the demand.

To aid the economic revival, the Reserve Bank of India (RBI) on Monday extended a fresh support of ₹50,000 crore to the All-India Financial Institutions for new lending in FY22. Out of which, NABARD will be provided a special liquidity facility (SLF) of ₹25,000 crore for one year to support agriculture and allied activities, the rural non-farm sector and non-banking financial companies-microfinance institutions.

“RBI has announced a SLF window to address liquidity problems faced by banks due to the pandemic. Last year, we released ₹1,500 crore to banks in Tamil Nadu under this facility. This year also we expect to extend around ₹2,000 crore to Cooperative Banks and RRBs to meet liquidity challenges, if any,” Selvaraj said.

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NeoGrowth to disburse business loans within 24 hours to retailers with instant approval

Banking & Finance

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SME lender NeoGrowth Credit on Thursday announced the launch of NeoCash Insta Loan to meet immediate fund requirements of retailers and small businesses.

“The NeoCash Insta Loan for retailers is a ₹1 lakh collateral free loan product, with just KYC documents without any financial or bank documents, instant online approval, and daily repayment amount of ₹250,” it said in a statement.

Small business owners can visit the NeoGrowth website and get immediate approval for the loan by filling in only basic details, it further said, adding that exhaustive digital checks for underwriting and usage of digitally verified alternate sources of data will be used to ensure risk mitigation and governance.

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Kerala Financial Corp records all-time high portfolio

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Kerala Financial Corporation has recorded an all-time high portfolio of ₹4,700 crore for the year ending March 31, 2021, provisional figures for which show a jump in the size by ₹1,349 crore over the ₹3,351 crore of the previous year with the company riding on a significant increase in loan approvals and repayments.

Tomin J Thachankari, Chairman and Managing Director (CMD), said that 2020-21 saw loan approvals alone worth ₹4,139 crore. This is an improvement of 244 per cent over the ₹1,659 crore of the previous year. Loan disbursements also kept pace and rose 258 per cent to ₹3,729 crore from ₹1,447 crore.

The base lending interest rate stands reduced to eight per cent since the Corporation was able to raise funds for as low as 6.5 per cent. Tomin Thachankari said that the Corporation expects a better net profit than the previous year owing to the better performance and reduced costs.

Better net profit expected

Thanks to its high capital adequacy ratio and low NPA, the Corporation had on January 1, 2021, reduced the base rate from nine per cent to eight per cent. It also drew advantage by the lower cost of funds. In this way, concessions received due to better performance have been passed on to customers.

The Corporation has decided to adopt Finacle, one of the leading core banking software, in view of its growth and technical requirements for future projects. Finacle will be operational soon, Thachankari said. The Corporation is also introducing debit cards in collaboration with public sector banks.

These debit cards can be used to transact all business as any regular debit cards, including in ATMs, POS machines and for online transactions and linked to the company’s mobile app to make high volume transactions. This is the first time in the state that a government institution is launching debit cards.

Finacle adopted, debit cards soon

The company website has been revamped and all loan applications are now accepted online. High speed one-to-one internet and video conferencing system has been implemented in branches. This has expedited the procedures overall and communication between branches and the head office. Repayments to special schemes are now made on a daily or weekly basis for convenience for which POS and Google Pay are employed.

Even during the pandemic-related crisis, repayments increased by 262 per cent from ₹1,082 crore to ₹2,833 crore. Interest income rose 131 per cent to ₹436 crore (₹334 crore). This was facilitated in part by the sharing of defaulters’ information to CIBIL and tightening of recovery procedures, he added.

Sharing of defaulter data

There has been a significant increase in repayment after information on defaulters was shared. About 24,000 records have been uploaded so far, Tomin Thachankari said. Among the financial institutions under the State government, Kerala Financial Corporation is the first to share defaulter data in this manner. Data is also being shared with other credit bureaus like Equifax, Experian and CRIF Highmark.

The Corporation has taken a soft approach to customers who are struggling due to the pandemic. Still, it has acted strictly with those who have deliberately defaulted on repayments. SARFAESI procedures have been expedited and resolution agents have been empanelled for this purpose. Units acquired are put up for sale through e-auction and a special loan scheme has been introduced for the purchasers.

Aim is complete overhaul

“Our goal for the year was a complete overhaul of the Corporation. More than just being an ordinary financial institution, we have remodelled it to one that offers customised loans and exemplary services to varied business sectors,” Thachankari said. Centralisation of the credit process and provision of an opportunity for clients to interact directly with top officials, including the CMD, have helped.

The Corporation has empanelled more agencies for customer verification, project report preparation and technical valuation to expedite loan processing. New loan proposals are directly analysed by the head office officials in the presence of the clients, Tomin Thachankari said.

Various loan schemes

The Corporation has sanctioned new loans of ₹256 crore to 419 industries struggling from the Covid-19 crisis. Furthermore, 1,937 new ventures were granted assistance under the Entrepreneurship Development Scheme. Loans up to ₹1 lakh were provided under this scheme without any collateral.

It also introduced various schemes providing assistance without any collateral requirement. This included schemes for startups, loans for electric vehicles, loans for converting buses to CNG, special loans up to ₹50 lakh to hotels and the facility of discounting bills for government contractors.

A special loan scheme for units affected by the pandemic is another. Loans amounting to ₹256 crore were sanctioned to 419 existing and new ventures under the scheme. It granted a moratorium to all units during lockdown. Special schemes are available for units engaged in the manufacture of masks and sanitisers.

Entrepreneurship development

The Entrepreneurship Development Scheme itself saw 1,937 new ventures being granted assistance. Loans up to ₹1 lakh were given to them without any collateral under which special preference was given to women and persons with disabilities, the CMD said.

Loans up to ₹50 lakh were offered at seven per cent under liberal terms and conditions. For non-residents returning home after losing jobs due to the pandemic, the scheme was offered at an interest rate of four per cent in association with the concerned department (NORKA).

Credit approvals for start-ups

Credit approvals were issued to 10 new startups during the year without any collateral security. A new scheme offered to fund up to 80 per cent of the work order received by the startups up to a maximum of ₹10 crore at an attractive 10 per cent. Similarly, the Corporation is providing up to ₹1 crore for the expansion of innovative prototypes in line with the development goals of the State government.

A special bill discounting scheme has been extended to government contractors to discount their bills without any collateral. The Corporation is also providing unsecured loans for converting buses to CNG and for purchasing electric vehicles. Special loans of up to ₹50 lakh were introduced to revive the tourism sector. Such loans are extended to hotels on a daily repayment basis with no collateral.

Bonds carry ‘AA’ rating

The Corporation has issued bonds of ₹250 crore during the year at an all-time best rate any state financial institution has managed so far, the CMD said. The strong financial base has helped it to get better rates than even major public sector banks. The bonds with ‘AA’ rating have a tenure of 10 years.

To keep the expenditures in check, strict controls have been introduced and all payments are now made directly from the head office. Avoidable telephone and internet connections incurring high costs are now disconnected. Old vehicles have been auctioned and vehicles are now rented for office use. These measures have helped in reducing the operational costs by 10 per cent, Thachankari said.

More women have been appointed to key positions to further the mission of women empowerment. The Corporation has also launched a platform for its employees to interact with business leaders to improve industry knowledge. Among notable business leaders featured are MA Yusuf Ali, Ravi Pillai, Azad Moopan and Kochouseph Chittilappilly.

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Bank credit sees uptick, but will it hold amid Covid resurgence ?

Banking & Finance

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Bank credit has seen an uptick in recent months indicating a recovery in economic activities but the resurgence of Covid-19 cases and limited lockdowns are raising fresh concerns.

Reserve Bank of India data reveal that year-on-year growth in non-food bank credit was 6.5 per cent in February. This is not bad when compared to a growth of 7.3 per cent in February 2020.

But the ongoing lockdowns are set to impact credit growth. CARE Ratings has pegged the potential loss of GVA to the country from the lockdown in Maharashtra for a month at about ₹40,000 crore in real terms.

Amongst sectors, credit growth to agriculture and allied activities, service and personal loans recorded robust expansion. However, credit to industry contracted marginally by 0.2 per cent in February compared to 0.7 per cent growth in February 2020 “mainly due to contraction in credit to large industries by 1.5 per cent”, RBI data showed.

Bankers expect a revival in credit demand to large industries in the second half of the fiscal with the capex push from the Union Budget.

Between end of March 2020 and February 2021, gross bank credit grew 3.3 per cent against 3.5 per cent last year, which analysts say is quite robust given the lockdown in the first quarter of 2020-21.

Provisional data by banks for the fourth quarter on loans and advances has shown an improvement compared to earlier quarters since the pandemic.

HDFC Bank reported a 13.9 per cent growth in advances as on March 31, compared to a year ago while Federal Bank’s gross advances increased by nine per cent in the same period. Advances growth for IndusInd Bank and YES Bank was more modest.

 

RBI policy

With the Monetary Policy Committee of the Reserve Bank of India expected to continue with its accommodative stance and maintain status quo on rates, there could possibly be continued demand for credit.

More clarity on economic prospects will be available on April 7 when the RBI comes out with the Monetary Policy statement.

According to rating agency Crisil, bank credit growth is set to speed up to 9-10 per cent in the new fiscal after mid-single digit growth in fiscal 2021 but it has cautioned that the sharp rise in Covid-19 cases since mid-February and the impact of any stringent containment measures on businesses are the key threats to the nascent demand recovery and could impact the credit quality outlook adversely.

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