Non-food credit grows 7.3% in November, fastest since January 2020

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November 19, 2021 3:45 AM

In recent months, loan growth has been driven in large part by retail loans, especially in the housing segment, and enterprise credit granted to small businesses under the emergency credit line guarantee scheme.

On the other hand, corporate growth remains sluggish due to underutilisation of capacities and deleveraging.On the other hand, corporate growth remains sluggish due to underutilisation of capacities and deleveraging.

The pace of growth in non-food credit picked up to 7.27% during the fortnight ended November 5, according to data released by the Reserve Bank of India (RBI), as the festive season helped drive a pick-up in lending. The last time non-food credit grew faster was during the fortnight to January 3, 2020, months before the pandemic outbreak in India.

In recent months, loan growth has been driven in large part by retail loans, especially in the housing segment, and enterprise credit granted to small businesses under the emergency credit line guarantee scheme (ECLGS). On Wednesday, finance minister Nirmala Sitharaman said that banks sanctioned loans worth Rs 76,012 crore to 1.75 million borrowers through a nationwide credit outreach programme between October 16 and November 7.

In a report dated November 13, analysts at Care Ratings said that with the onset of the festive season, bank credit has improved led by growth in the retail segment. “This rise has been supported with rate cuts by banks to push retail credit as several banks are offering home loans at record low-interest rate ahead of the festive season,” the report said. The rating agency expects bank credit to grow in the range of 7.5-8% for FY22 due to a low base effect, economic expansion, extended ECLGS support and a retail credit push.

On the other hand, corporate growth remains sluggish due to underutilisation of capacities and deleveraging.

Emkay Global Financial Services said in a note on Thursday that the muted trend in corporate demand has forced some public sector banks (PSBs) to cut their growth guidance by 100-200 basis points. “Though the sanction pipeline is building up from sectors such as textiles, petrochemical, chemical and steel, Emkay Global has trimmed its systemic credit growth estimates to 8% from 9% for FY22, factoring in the impact of continued sluggishness in corporate credit on PSBs and a few large banks,” the broking firm said.

With reference to languishing credit demand in the corporate segment, Sitharaman exhorted industry to undertake expansion and supplement the government’s efforts to stimulate growth. “At a time when India is looking at healthy growth, looking forward to industry to give additional impetus to growth…I want India Inc to be a lot more risk-taking. Industry should not delay creation of additional capacity,” she said.

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