Bank credit to industry turns around in FY22, infra lending tops Rs 1 trn

Credit to medium-sized industries grew a robust 71.4% in March 2022 from 34.5% last year, that to micro and small units was 21.5% (3.9%) and to large industries was 0.9% against contraction of 2.5%

Keeping up pace with the economic upturn, credit to industry rose by 7.1 per cent (year-on-year) in FY22. This is against a de-growth of 0.4 per cent in FY21, a year when the first wave of Covid devastated the economy.

The Reserve Bank of India (RBI), in a statement, said size-wise, credit to medium industries registered a robust growth of 71.4 per cent in March 2022 compared to 34.5 per cent last year. Credit growth to micro and small industries accelerated to 21.5 per cent from 3.9 per cent. Credit to large industries recorded a marginal growth of 0.9 per cent against a contraction of 2.5 per cent during the same period last year.

In absolute term, Bank credit to industry expanded by Rs 2.09 trillion in Fy22 as against contraction of over Rs 11,000 crore in Fy21.

Gross credit of commercial banks expanded by 9.6 per cent in FY22 from 4.6 per cent in FY21. In absolute terms, banks lent Rs 10.43 trillion in FY22, up from Rs 5.39 trillion in FY21. Rating agency CRISIL — in a separate report — said healthy economic activity and budgetary support from the government would lift bank credit growth by 200-300 basis points to 11-12 per cent in FY23.

“The biggest difference we expect this fiscal year is the upshift in the corporate credit growth trajectory. We see it doubling to 8-9 per cent,” said Krishnan Sitaraman, deputy chief ratings officer, CRISIL Ratings.

RBI data showed that the infrastructure sector saw a good traction with growth scaling to

9.3 per cent in FY22 from just 1.6 per cent in the previous year.

In absolute terms, banks gave Rs 1.01 trillion in loans for infrastructure in FY22 against a mere Rs 17,787 crore in FY21.

The Union Budget pegs public capex outlay at around Rs 7.5 trillion for 2022-23. This is a significant increase over last fiscal with a sharp focus on public infrastructure. Credit growth to the services sector accelerated to 8.9 per cent in March 2022 compared to 3 per cent a year ago. This is mainly due to a significant improvement in credit growth to finance companies and robust credit off-take to ‘trade’ and ‘transport operators’.