Business loan growth turns positive in FY22

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Corporate advances by regular commercial banks returned to growth in fiscal 2022.

According to data from the Reserve Bank of India, lending to large industries recorded marginal growth of 0.9% in the fiscal year ending March 2022. In the previous fiscal year (fiscal 21), there had a 2.5% contraction in business credit.

Individual data from major banks including State Bank of India, Punjab National Bank and Union Bank of India started the fiscal year with negative corporate advance growth in the first quarter of FY22. However, there was a recovery from the third quarter for many banks which ended the full year with an increase in lending to large industries compared to the previous year.

Business credit

SBI, for example, identified “strong growth” in business credit as one of the drivers of its 11% credit in FY22. annual growth of 6.25% to ₹24,01,761 crore (₹21,82,516 crore),” he said. The Punjab National Bank also recorded a 5.4% increase in the corporate and other lending segment, excluding MSME lending.

“While the increase in the individual portfolios of a few large banks is certainly welcome, the growth pattern is uneven and some players are still hesitant to lend now given the recent shift in focus by the RBI. If RBI goes further on rates, it’s likely to impact credit demand for huge loans as well,’ a senior official at a major PSB said. Activity area.

Key indicators

Economic activity indicators, as observed by the SBI, showed a sequential improvement in oil consumption, electricity demand, sales of two-wheelers and tractors, non-oil imports other than gold, capital imports, cement production, GST electronic transport bills, RTO revenue collections. Its composite index also recorded an improvement in economic activity that continues in the last quarter of the previous fiscal year.

Within industry, growth in credit to “all engineering”, “beverages and tobacco”, “chemicals and chemicals”, “construction”, “agribusiness”, “infrastructure”, “mining and quarries”, “petroleum, coal and nuclear fuels and textiles”, among others, improved in FY22 compared to FY21.

However, credit growth to base metals and metal products “cement and cement products, “glass and glassware”, precious stones and jewelry”, paper and paper products, and wood and wood products has slowed/contracted, according to RBI data.

Despite the challenges, there are positive drivers for business credit demand. “Given the current dynamics of the bond market, some companies could migrate from the bond market to bank credit. In addition, working capital limits are also likely to increase,” said ICRA Vice President Anil Gupta.

Published on

May 25, 2022

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