Holiday season retail demand and MSMEs drive bank lending growth in October

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Reflecting the increased demand for the holiday season, retail bank credit covering housing, vehicles and credit cards, etc. grew 11.7% year-on-year in October 2021, up from 8.7% in October 2021.

Data from the Reserve Bank of India showed year-over-year growth in home loans was stable at 8.4% in October 2021 from 8.1% a year ago. Auto loans increased 8.4 percent from 5.7 percent during this period. The credit card segment saw a sharp increase to 11.9% in October 2021 from 5.9% a year ago.

CS Setty, Managing Director (Retail & Digital Banking, State Bank of India), said that the credit disbursement in the retail category has been good during the preparatory period and during the festival season (Dussehra and Diwali). In addition, comments from the field indicate demand for credit did not decline sharply in the post-festival period in November.

Economic dynamics are stronger in the third quarter of the current fiscal year (T3FY22) than in the same quarter a year ago, when the economy was gradually emerging from the shock of the first wave of the Covid-19 pandemic. Ahead of the busy season that begins in October, the economy grew 8.4% in the second quarter ended September 2021 (T2FY22) against a sharp 7.4% contraction in T2FY21.

Credit withdrawals in the industrial segment were also sustained in parallel with the recovery in economic activity. Industry credit growth reached 4.1% in October 2021 from a 0.7% contraction in October 2020, RBI said.

In terms of size, credit to micro and small industries accelerated to 11.9% in October 2021, down from 0.7% a year ago. Programs such as government guaranteed emergency credit have helped provide credit support to units in areas affected by Covid-19.

The mid-size segment grew 48.6% in October 2021, up from 20.8% last year. Credit to large industries rose 0.5% in October 2021 from a contraction of 1.8% a year ago, he said.

Agriculture and related activities continued to perform well, registering accelerated growth of 10.2% in October 2021 compared to 7.2% in October 2020.

The slowdown in service credit growth continued, slowing to 2.9. percent in October 2021 up from 8.6 percent a year ago, RBI added.

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