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Most lenders are hopeful of improved customer sentiments and higher disbursements in the second half of the fiscal with a drop in Covid-19 infections and normalisation of economic activities.
Second-quarter results of private banks and non banking finance companies indicated improved sentiments and higher disbursements. Most lenders said they expect a pick-up in corporate loans as well in the second half of the fiscal.
“Most private banks demonstrated a steady recovery in loan growth, led by the retail, SME and business banking portfolios. Most banks also reported a decline in gross and net non-performing assets ratio due to higher recoveries/upgrades during the quarter,” said a report by Motilal Oswal.
In the second quarter of the fiscal, all NBFCs exhibited a sharp improvement in disbursements which had been impacted by the second Covid wave in the prior quarter, it further said.
HDFC Bank reported a 15.5 per cent increase in its total advances as of September 30, 2021 to ₹11,98,837 crore from a year ago while ICICI Bank reported 17 per cent growth in advances on a year-on-year basis.
“Festive season demand is much higher than what we saw last fiscal. Further, typically the second half of the year is busier in terms of disbursements. We expect that with the economy opening up and hopefully no third wave, loan demand should pick up further, especially in the fourth quarter of the fiscal,” explained a senior bank executive.
NBFC performance
Mahindra & Mahindra Financial Services reported that in October 2021, the business continued its momentum with disbursement of about ₹2,650 crore, which is a 20 per cent y-o-y growth.
“In the absence of a third wave, (we are) quite confident about the second half of the year on growth, risk and financial metrics,” Bajaj Finance said in its investor presentation for the second quarter of the fiscal, adding that under such circumstances, it expects quarterly AUM growth rate to be strong for the rest of the year.
Bajaj Finance had reported a 75 per cent jump in new loans booked during the second quarter at 63.3 lakh from 36.2 lakh in the second quarter last fiscal.
Credit growth has seen some pick-up in recent weeks. Data with the Reserve Bank of India shows that on a y-o-y basis, non-food bank credit growth accelerated to 6.8 per cent in September 2021 as compared to 5.1 per cent in September 2020.
Credit growth to industry picked-up to 2.5 per cent in September 2021 from 0.4 per cent in September 2020. Credit growth to the services sector decelerated to 0.8 per cent in September 2021 from 9.2 per cent in September 2020, mainly due to contraction in credit growth to NBFCs, trade and commercial real estate. However personal loans grew by 12.1 per cent in September 2021 as compared to 8.4 per cent a year ago.