Infrastructure is witnessing an increase in credit flow says FICCI-IBA survey

The fifteenth round of the FICCI-IBA survey was carried out for the period January to June 2022. A total of 25 banks including public sector, private sector and foreign banks participated in the survey. These banks together represent about 76% of the banking industry, as classified by asset size. Despite a muted start of the year with Omicron wave taking over, the economic activity in India remains in recovery mode. Growth is seen broad basing with most sectors operating at pre-pandemic levels. The contact-based services sector, which was most severely impacted by the pandemic waves, is also seen gaining traction.

The survey findings show that long-term credit demand have been growing for sectors such as Infrastructure, Chemicals, Food Processing, Metals, Iron & Steel and Petroleum products. Infrastructure is witnessing an increase in credit flow with 76% of the respondents indicating an increase in long term loans as against 68% in the previous round. In case of Chemicals, 52% of the respondents indicated an increase in long term loans in the current round as against 32% in the previous round while the Petroleum products sector was indicated by 40% of the respondents, in the current round as against 27% in the previous round. The survey suggests that the outlook on expectation on growth of non-food industry credit over next six months is optimistic with 48% of the participating banks expecting non-food industry credit growth to be above 10% as compared to 13% who reported likewise in the previous round.

An uptick in CASA deposits has been reported by a majority (75%) of respondent banks in the current round of survey. The reasons cited by respondents for increase in the share of CASA deposits include reduction in interest rate spread between the fixed deposit rate and saving deposit rate, increased focus by Banks on low-cost deposits (CASA) in line with the credit growth and increased spending habits as economy has started picking up with a dip in Covid-19 cases.
A vast majority (92%) of respondent banks reported credit standards for large enterprises to have remained unchanged as against 78% in the last round. None of the banks reported tightening of credit standards during first half of 2022 as against 9% in the previous round. For SMEs too, as against 55% of the respondent banks reporting no change in credit standards in the last round, 68% of the respondents have reported the same in the current survey round, and 28% have reported easing in credit standards. The credit standards are likely to remain unchanged even in the second half of 2022, as reported by a large majority of respondent bankers.