H2FY22 Loan Rise: Loan Growth Exceeds 6% in February


Non-food credit growth rate on an annual basis (YTD) reached 6.14% in February, as banks benefited from better loan underwriting in the second half of the year, usually a busy season for lenders. For much of FY22, year-to-date loan growth has been subdued, remaining in negative territory for the first six months, with a jump seen in December when it jumped to 6 .5%.

As of February 25, the value of outstanding bank loans stood at 115.59 trillion rupees, up 8.03% year-on-year (year-on-year), according to data released by the Reserve. Bank of India (RBI). Retail credit demand, coupled with support under the Emergency Line of Credit Guarantee (ECLGS) scheme, provided the most support for bank lending growth throughout the year, according to industry analysts and RBI industry data.

Analysts viewed the trend of continued improvement in credit growth as positive. Jefferies said in a report dated March 15 that while the 8% growth rate in February appears slower than the 9% print in December 2021, that reading was boosted by seasonal factors. “The improvement in growth is encouraging compared to 6-7% growth at the start of CY21. Personal credit remained strong while corporate credit growth also picked up. Bond issuance doubled sequentially in February 2022,” the report states.

Admittedly, credit drawdown also benefited from an improvement in overall business activity. Broader macroeconomic indicators suggest better year-end prospects for banks. The Nomura India Business Resumption Index hit a record high of 122.8 for the week ended March 13, from an upward-revised 121.0 the previous week, 23 percentage points above the levels of before the pandemic. The resumption of business has stood at 22-23 percentage points above pre-pandemic levels since late February, Nomura said.

However, Russia’s war in Ukraine could pose new challenges to growth, especially in the auto loan segment. The problem of semiconductor chip shortages, which impacted vehicle availability for much of 2021, could resurface, some experts say. Emkay Global Financial Services said in a recent note: “According to bankers, vehicle availability was improving, but the recent Russian-Ukrainian conflict has again raised concerns about semiconductor supplies. As a result, few financiers have ventured into used car financing for volume and better returns.


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