You are here: Home » Finance » News » Banks
Business Standard

Credit growth of banks recovers; festivals help demand: Ratings agency

Bank credit grew by 180 basis points from the year-ago level of 5.1 per cent in the fortnight ended October 23, 2020: CARE.

Topics
bank credit growth | Home loans | India economy

BS Reporter  |  Mumbai 

home loans, property, loans, banks, credit

The banking system’s credit growth is recovering, helped by festival-time demand for retail loans, according to analysis by a rating agency.

The year-on-year (y-o-y) bank credit grew by 180 basis points from the year-ago level of 5.1 per cent in the fortnight ended October 23, 2020. This is also a 40 basis points improvement from the previous fortnight.

In absolute terms, credit offtake increased by Rs7.1 trillion over the last twelve months and by Rs.0.3 lakh crore as compared with the previous fortnight.

The y-o-y increase reflects “the low base effect, festival season spending, and the easing of lockdown restrictions across regions in India,” CARE Ratings said in a note.

The credit growth remained tepid amid the second wave of the pandemic, but after restrictions were eased since June 2021, improved gradually from 5.7 per cent (fortnight, June 04, 2021) to 6.8 per cent (fortnight, October 22, 2021).

The overall non-food credit growth continues to be driven by retail, and agriculture & allied activities segments, but with the onset of the festive season, the retail segment pulled up the credit growth.

“This rise has been supported with rate cuts by to push retail credit as several are offering at record low interest rates ahead of the festive season, e.g., in October 2021, like PNB have cut down its benchmark lending rate by 5 basis points to 6.50 per cent and Union Bank of India (UBI) has slashed the interest rate on by 40 basis points," said CARE.

It expects credit growth of 7.5 per cent to 8.0 per cent for FY22 with a low base effect, economic expansion, extended ECLGS support (sanctions permitted till March 2022 and disbursements till June 2022), and retail credit push.

“The medium-term prospects look promising with diminished corporate stress and increased provisioning levels across banks. Retail loan segment is expected to do well as compared with industry and service segments,” CARE said.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, November 24 2021. 12:26 IST
RECOMMENDED FOR YOU
.