Credit growth grows at rapid pace in Sept: SBI Ecowrap

Credit growth in the system has grown rapidly in September mainly due to demand from housing, NBFC and MSME sectors, SBI said in a research report on Thursday.

Credit growth has picked up rapid pace beginning September 2019 jumping by Rs 1.08 lakh crore, courtesy, housing, NBFC (non-banking financial companies) and lately MSME (micro, small and medium enterprises), said the SBI Ecowrap authored by Group Chief Economic Adviser Soumya Kanti Ghosh.

Citing sectoral data for the month, the report has indicated that for the first time in the current financial year, credit to industry turned positive and jumped Rs 9,700 crore, of which Rs 8,200 crore is attributable to the MSME sector.

In September, the jump in retail credit at Rs 51,900 crore was nearly double that of August, of which housing loans jumped by 2.6 times from August.

Bank lending to the NBFC sector has remained robust and the year-to-date growth of this is the highest across all segments at 11.3 per cent, the report said.

During the April-September period, though the incremental credit to the infrastructure sector of all scheduled commercial banks (ASCBs) have declined by Rs 52,100 crore, SBI credit to infrastructure has increased by Rs 10,130 crore.

"We are less hopeful of a growth pick up in Q2FY20. Out of 26 indicators, only 5 indicators were showing acceleration in September. This indicates the extend of demand slowdown in the economy is still significant and would take longer time to recover," Ghosh said.

He said the bank's base case projection is a modest third quarter growth revival with an inventory drawdown beginning to happen more forcefully from October onwards and an accelerated government spending (Rs 3.1 lakh crore in September which is 20 per cent of overall spending) to clear outstanding dues.

"If we map the leading indicators showing acceleration, there is a distinct possibility that growth in GDP (gross domestic product) in Q2 will be lower than 5 per cent. FY20 growth rate is likely to slip below 6 per cent, as against RBI projection of 6.1 per cent," Ghosh said.