PremiumMedium-term prospects look promising with diminished corporate stress and a substantial buffer for provisions. However, inflation remains a key risk. Even as RBI has managed domestic inflation to some extent, global inflation has remained high despite hawkish policies
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NEW DELHI: Incremental bank credit offtake rose 4.8% in August, the highest growth reported in the last thirteen years and after a negative growth for three years, CareEdge Ratings said in a report on Monday.
According to CareEdge, retail loans rose 7.9% compared with 1.6% growth reported during the year-ago period. Industry credit rose 1.2% in August 2022, compared to a 2.6% decline in the same month a year ago, due to inflation-induced working capital requirements and improvement in capacity utilisation, the ratings agency said.
Services’ credit also rose 4.8% as against a drop of 2.8% in August 2021, it said.
Gross credit registered a robust growth of 15.5% year-on-year in August from 6.7% over a year ago, the report said.
In terms of sub-segmental performance, other personal loans (growth of 23.1%), housing (growth of 16.4%), vehicle loans (growth of 19.5%), Micro, Small and Medium Enterprises (MSME) (growth of 30.2%), NBFCs (growth of 27.8%) and trade (growth of 16.9%) were the key growth drivers, the credit rating agency said.
The retail loan segment, the largest segment with a 31.6% share in overall bank credit, saw a robust growth of 19.5% year-on-year in August primarily due to growth in other personal loans (23.1%), credit card receivables (27.3%) and consumer durable loans (65.2%) driven by a low base, onset of the festival season and stable job market condition.All sub-segments have reported growth within the retail loans segment during the period.
Housing loans, with a share of 49.0% within retail, grew 16.4% y-o-y in August compared with 11.6% in the year-ago period. Vehicle loans (share of 12.2% within retail) registered a growth of 19.5% y-o-y in August as compared with 11.1% in the year-ago period.
According to the CareEdge report, consumer durables (share of 0.9% within retail) continued its robust growth of 65.2% y-o-y in August as compared with a growth of 46.6% in the year-ago period due to onset of festival season.
Incremental credit growth of the retail segment stood at 7.9% in August, from 1.6% over a year ago. In absolute terms, credit outstanding was at ₹36.5 trillion as of 26 August 2022, up from ₹33.8 trillion as of 25 March, the rating agency said.
Services sector credit rose by 17.2% y-o-y in August compared with a marginal growth of 2.1% a year ago, due to growth in the NBFCs, and wholesale trade. The remaining segments of the services sector, too, reported growth except for the aviation segment (which dropped by 21.2%), it said.
Outstanding industry credit stood at ₹31.9 trillion as of 26 August 2022 , up from ₹31.6 trillion as of 25 March. The credit outstanding of the industry segment registered a growth of 11.4% y-o-y in August from 1.5% in the year-ago period. The growth was due to robust growth in the MSMEs which were driven by ECLGS, inflation-induced working capital requirements, and ease of doing business supported by increasing digitisation in the banking system for faster loan turnarounds.
“Credit growth is likely to remain elevated in the short term due to the onset of the festival season," CareEdge report said. “Medium-term prospects look promising with diminished corporate stress and a substantial buffer for provisions. However, inflation remains a key risk. Even as RBI has managed domestic inflation to some extent, global inflation has remained high despite hawkish policies. This may lead to demand issues globally causing second-order effects in India."