MUMBAI: Strong signs of revival in credit demand are visible as loan growth has gathered momentum. Almost 90 % of new loans by banks in FY'18 so far are disbursed between November and January. Among others higher bond yields has forced some borrowers back to bank.

Total loans extended by the banks amounted to 8.6 lakh crore as of February 02’17, up almost 11% year-on-year compared a growth of 5% y-o-y in the same period a year ago, according to the latest RBI data. A higher growth rate could be attributed to the base effect.

But significantly, in absolute terms, almost 90% of the incremental loans extended since the beginning of the fiscal have been disbursed between November and January. This is despite banks seeing a rise in loan recoveries, which tends to lower outstanding loan amounts.

According to the December release on sectoral flow of bank credit, loans rose in double digit across all sectors including agriculture, industry, services and retail posting higher growth rate than in the same period a year ago, possibly indicating early signs of revival.

“This increase in corporate assets is either due to working capital requirement following higher capacity utilisation from some of the companies or from refinancing of debt by many high rated companies,” said Chanda Kochhar, managing director at ICICI Bank during a recent media interaction. “We expect that credit growth for us will continue to be above 15 per cent, within which the retail growth will continue to be above 18-20 per cent,” she said.

A possible reason for a rise in bank credit is also due to hardening of bond yields, according a presentation on debt market by ratings firm Icra. It said that growth in bonds and commercial paper issuances has slowed down off late corresponding to the growth in bank loans