Bankers' sentiment on lending improves; loan demand to rise: RBI survey

After a severe impact of the Coronavirus (Covid-19) pandemic during April-June 2020, bankers’ sentiments on lending conditions have shown a broad-based improvement. The demand for loans is expected to become better, according to RBI’s bank lending survey.

Responses suggest that perceptions on retail/personal loans, which were most severely hit during the period, have bounced back. There is lower optimism for the infrastructure, mining and quarrying sectors when compared to other major sectors. The survey is part of RBI's December 2020 bulletin.

The Covid-19 pandemic and the related lockdown led to significant contraction in loan demand across all sectors during April-June 2020, which severely dampened the sentiment among Indian lenders.

During July-September 2020, however, the loan officers’ sentiments recovered quickly, and the improvement was broad based. The retail/personal loan demand was assessed to have posted maximum recovery after recording sharpest fall during the lockdown quarter (Q1FY21).

In the eleventh round of the BLS conducted during January-March 2020, senior loan officers expressed lower optimism for credit demand for all sectors. They did not anticipate the contraction in advance as they could not foresee the full impact, due to the severe and sudden nature of the Covid-19 pandemic witnessed later, survey added.

The subsequent two survey rounds indicated improved quarter-on-quarter loan demand expectations. Among major sectors, bankers have been generally expecting higher demand for retail/personal loans and agriculture segments in recent times, followed by manufacturing and services sectors.

Bankers do not foresee sudden quarter-on-quarter change in loan terms and conditions. These are more dependent on performance of loans across sectors, macroeconomic conditions and opportunities for growth across sectors.

The agriculture and personal loan segments have always been in the positive terrain indicating better loan terms and conditions in these sectors. The sentiments on loan terms and conditions for services sector too, indicated easing, barring the assessment during the lock-down quarter, it added.