The non-food credit growth continued its upward trajectory and jumped 15.1% year-on-year (y-o-y) as of fortnight ended July 29 aided by lower base of the year ago period. The outstanding non-food credit at Rs 123.7 trillion during the fortnight ended July 29, as per data released by the Reserve Bank of India (RBI).
The credit growth for banks is driven by retail loans, especially home loans, which constitute 50% of all retail loans. India’s home loan market, currently valued at Rs 24 trillion is expected to increase by 100% in the next 5 years, State Bank of India (SBI) Research said in a report. While the loan growth improved significantly for the banking sector in Q1FY23, private sector banks fared better than their public sector peers.
In the recently disclosed earnings for Q1FY23, SBI posted credit growth of 16% y-o-y led by retail advances, with individual mortgage portfolio registering its all-time high growth in Q1. Similarly, Bank of Baroda has posted near 20% y-o-y loan growth, with management expecting the trend to continue.
The corporate loan growth has also shown significant improvement along with retail credit backed by increase in capacity utilisation and drop in issuance of commercial papers (CP).
Corporate credit cycle is expanding with bad loans under control and corporate balance sheets largely deleveraged, ICICI Securities said in a report, adding that the capital expenditure cycle improving for the heavy industries such as metal, energy, power, telecom and the real estate sector.
Deposits growth however lagged in comparison, with the deposits increasing by 9.1% y-o-y to Rs 169.7 trillion. The RBI has taken a note of widening gap between the growth rates of credit and deposits. Banks cannot rely on the central bank and will have raise deposits to support credit offtake, RBI Governor Shaktikanta Das said in a post policy press conference on August 5. Banks are raising their deposit rates after consecutive rate actions by the RBI. There is very aggressive deposit mobilisation, starting with bulk deposits and the RBI expects deposit mobilisation to catch up, Michael Patra, deputy Governor at RBI said.