Infra investments across construction a boost for country’s lending sector

ET Intelligence Group: A greater push to infrastructure investments across construction and logistics, extension to the emergency credit scheme with additional cover, and thrust on digital banking are some of the major takeaways for the country’s lending sector. These measures come amid signs of an improving credit cycle. The bank credit grew by 9.3% year-on-year in December 2021 compared with the 7.1% growth in the previous month. The credit growth has been inching up for the past six months in a row.

The budget announcement of the PM Gati Shakti plan will mobilise investments in the road infrastructure and logistics. The finance minister also announced the extension of the Emergency Credit Line Guarantee Scheme (ECLGS) to March 2023 with an additional guarantee cover of Rs 50,000 crore to help the micro, small, and medium enterprises (MSME). The government had launched the scheme in 2020 to support the industry during the pandemic. It provides 100% guarantee coverage to banks and finance companies extending emergency credit facilities.

The budget allocated Rs 48,000 crore to build 80 lakh houses under the PM Awas Yojana (PMAY). This augurs well for affordable housing finance companies. The stock Aavas Financiers gained nearly 8% after the budget on Tuesday.

The budget proposed opening 75 digital banking units across 75 districts in the country to expand digitisation in the lending sector. A focus on digital payments is expected to help the growing fintech sector in the country. The stocks of fintech companies including one 97 Communications (Paytm) and PB Fintech (Policy Bazaar) gained nearly 5% and 10% on Tuesday.