Bank credit growth seen at 6% in June quarter

Channel checks and discussions with bankers point to a stronger rebound in retail credit in the absence of a third wave of covid-19 and easing of lockdowns, say analysts.

1 min read . Updated: 12 Jul 2021, 12:08 PM IST Livemint, Edited By Ajith Kumar

According to analysts the growth is largely in line with systemic credit growth and reflects the underlying disruption in retail and small business sectors

MUMBAI : Bank credit is estimated to have grown 6% year-on-year (y-o-y) in the June quarter of FY22, largely in line with systemic credit growth and reflecting underlying disruption in retail and small business sectors, analysts said.

Analysts at Emkay Global said that channel checks and discussions with bankers point to a stronger rebound in retail credit in the absence of a third wave of covid-19 and easing of lockdowns.

“We estimate overall credit growth of 9% for FY22 with a reasonable pick-up in retail credit in the second half of FY22 and back-end working capital demand from corporates," Emkay Global said in a report on 9 July.

Considering less stringent lockdowns this time unlike last year, analysts expect overall bad loan formation to remain moderate, and will be partly offset by restructuring and government-guaranteed loans. Within retail, stress remains elevated, mainly in commercial vehicle, personal loan, loan against property, two-wheeler loans and microfinance, which should lead to higher stress formation for banks with higher exposure to these segments, it said.

However, stress among small and medium enterprises could largely be suppressed through sovereign-backed loans and debt recasts.

“Within large corporates, Srei Group could remain standard due to the National Company Law Tribunal (NCLT) order, while restructuring of Shapoorji Pallonji and sale proceeds of UB Group towards dues of Kingfisher could be positive for select banks," it said.

The brokerage expects overall pre-provisioning operating profit growth to be soft due to subdued growth in margins accentuated by bad loan recognition, moderate treasury support, and the lack of large one-off gains such as recovery from Bhushan Power in the March quarter.

“Overall credit cost, too, could be elevated due to upfront stress recognition, partly offset by some contingent provision buffer usage by select banks," it said.

MINT PREMIUM See All

Subscribe to Mint Newsletters

* Enter a valid email

* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!