Non-food credit growth slipped below the 8% mark to 7.89% year-on-year (y-o-y) during the fortnight ended Febru- ary 11 from 8.3% in the previous fort- night, according to data released by the Reserve Bank of India (RBI). Outstanding non-food credit as on February 11 fell to 114.67 lakh crore from115 lakh crore at the end of the previous fortnight. Deposit growth continued to hold strong, rising to 9.11% y-o-y dur- ing the fortnight under review from 8.31% in the previous fortnight.The value of deposits with the banking system stood at Rs 161.28 lakh crore.
Credit to retail borrowers continues to be the chief component of credit growth. As per sectoral data released earlier by the RBI, loans to individuals grew 14.3% y-o-y in December 2021 and loan growth to industry improved to 7.6% from 0.4% in December 2020. Sectoral data for sub- sequent months is yet to be released.
While there are early signs of a pick-up in corporate credit growth, the recovery is yet to become entrenched in that segment. In fact, some analysts believe that the slackening in the pace of growth from 9.3% in December 2021 to 8% in January is due to repayments by corporates.
Emkay Global Financial Services said in a recent note, “Credit growth in early Jan ’22 moderated a bit to 8% due to run-off of short-term corporate loans and banks turning risk-averse due to a surge in Covid cases.” Bankers say demand from corporates is coming back, with requests for working capital making up a bulk of the demand.
Suresh Khatanhar, deputy managing director, IDBI Bank, said some of the better rated companies may have been tap- ping the markets for their long-term needs, but for working capital they have to approach banks. “Demand is coming from all sectors, except the core sectors. That too should pick up as capex improves. Retail is of course doing well, but corporate should start contributing more now,” Khatanhar said.
Sanjiv Chadha, MD&CEO, Bank of Baroda, said the demand has been coming from sectors where the government has given a push, such as roads and solar energy. “We have seen good demand because of the second-order effects of the government’s build-out of the infrastructure sector in terms of steel and cement companies putting up brownfield projects,” Chadha said after the bank’s third quarter results.
