For much of FY22, YTD bond growth remained muted and remained in negative territory for the first six months, peaking in December when it rose to 6.5%.

The annual growth rate of non-food credit (YTD) rose to 6.14% in February, as banks benefited from better borrowing in the second half of the year, a typically busy season for lenders. For much of FY22, YTD bond growth remained muted and remained in negative territory for the first six months, peaking in December when it rose to 6.5%.

On February 25, the value of outstanding bank loans was Rs 115.59 trillion, up 8.03% year-on-year (yoy), according to data released by the Reserve Bank of India (RBI). According to industry analysts and industry data from the RBI, retail loan demand, coupled with the support provided under the Emergency Credit Line Guarantee Scheme (ECLGS), provided the most support to bank loan growth during the year.

Analysts viewed the continued improving trend in credit growth as positive. Jefferies said in a March 15 report that while the 8% growth rate in February appears slower than the 9% printout in December 2021, that reading was boosted by seasonal factors. “The growth improvement is encouraging versus a growth of 6-7% at the beginning of CY21. Retail credit remained good, while corporate credit growth also picked up. Bond issuance doubled consecutively in February 2022,” the report said.

Certainly, the decline in credit has also lent a hand with an improvement in overall business activity. Broader macroeconomic indicators point to a better year-end outlook for banks. The Nomura India Business Resumption Index rose to a record high of 122.8 for the week ended March 13, from an upwardly revised 121.0 in the previous week, 23 percentage points above pre-pandemic levels. Business resumption is 22-23 percentage points higher since the end of February than before the pandemic, Nomura said.

However, Russia’s war in Ukraine could pose a new challenge to growth, especially in the auto loan segment. The problem of a shortage of semiconductor chips, which affected vehicle availability for much of 2021, could resurface, according to some experts. Emkay Global Financial Services said in a recent note: “According to bankers, vehicle availability has improved, but the recent conflict between Russia and Ukraine has raised further concerns about the supply of semiconductors. As a result, few financiers have ventured to finance used cars to get volume and better yields.”


This post H2FY22 Credit Growth: Loan Growth Soars to Over 6% in February was original published at “https://www.financialexpress.com/industry/banking-finance/h2fy22-lending-boost-loan-growth-rises-to-over-6-in-february/2464916/”

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