“The capital infusion program and commentary suggests that the focus is also to have more public banks out of the PCA (prompt corrective action) framework and ensure that lending is not constrained by these factors,” the note said.
Growth in outstanding loans to industry rose to 4% year-on-year (y-o-y) — the highest in nearly three years — in November 2018, showed data released by the Reserve Bank of India (RBI) earlier this week. The value of loans to the industrial sector stood at `27.08 lakh crore as on November 23, reflecting a surge in loan disbursements during November. The last time credit to industry grew fastest was in February 2016, when the value of outstanding loans had increased 5.4% y-o-y.
According to a recent note by State Bank of India (SBI), of the total incremental credit expansion of `4.34 lakh crore in the current fiscal, `3.46 lakh crore is accounted for during the three months ended November 2018. “Credit to industry has accelerated again in November after a lacklustre October, with food processing, fertilisers, iron and steel, cement, petroleum and infrastructure (roads and power) leading the way,” SBI wrote in the report. “However incremental credit to NBFCs (non-banking financial companies) has declined further in November (`3,700 crore against `16,000 crore in October and `56,500 crore in September).”
Among sectors, mining and quarrying clocked the fastest growth in November 2018, with loans outstanding shooting up 31.8% y-o-y to `42,992 crore. While medium industry posted a whopping 11% growth in credit, the large, and small and micro categories saw loans grow 4.2% and 1.1%, respectively. Outstanding loans to industry had recorded positive growth for the first time in 14 months in November 2017, rising 1% y-o-y to `26.04 lakh crore.
Loan growth had been suffering partly due to capital-starved public-sector banks. Analysts expect the recent recapitalisation of state-owned banks to fuel credit growth in the months ahead. In a recent note, brokerage Kotak Institutional Equities (KIE) wrote that capital may be less of a constraint for banks. “The capital infusion program and commentary suggests that the focus is also to have more public banks out of the PCA (prompt corrective action) framework and ensure that lending is not constrained by these factors,” the note said.