The boost in non-meals credit enhanced in February, increasing to 6.61% year-on-year (y-o-y) for the fortnight ended February 12, up from 5.92% in the preceding fortnight.
As on February 12, outstanding non-meals credit stood at Rs 106.28 lakh crore, showed information released by the Reserve Bank of India (RBI). Commercial paper (CP) issuances fell through the fortnight ended February 15 to Rs 88,216 crore from Rs 89,041 crore through the preceding fortnight. The CPs outstanding declined to Rs 3.99 lakh crore from Rs 4.11 lakh crore at the finish of January.
Deposits with banks continued to develop and stood at Rs 147.81 lakh crore, up 11.76% y-o-y. The credit-deposit ratio was 71.9%.
Muted development in lending to big industries, the housing sector and non-banking economic businesses (NBFCs), restricted the boost in bank credit development through the period below overview. According to a current note by Care Ratings, the 3 segments account for 27%, 14% and 7% respectively, of gross bank credit.
The RBI stated in its ‘State of the Economy’ report that bank credit to big industries remained in contraction in December 2020, even as other segments showed indicators of recovery. Several of these borrowers, specifically these with higher ratings, are raising funds by way of bonds, debentures and other market place-based instruments to take benefit of the prevailing low interest price regime and also to retire previous higher expense debt. Loans for specialist services had been also in contraction. Growth in bank credit to NBFCs slumped to 8% in December 2020, as against a development of 28% a year ago.
On Monday, Crisil stated that in the present fiscal, bank credit is noticed increasing 4-5%. This is a revision of the rating agency’s projection from June 2020, when they had anticipated bank credit development to be -1%. In FY22, Crisil expects bank credit to bounce back to 9-10% levels, driven by a choose-up in corporate credit, the government’s infrastructure push and a most likely revival in demand. Retail lending, a significant driver of bank credit in the previous, is anticipated to slow down to 9-10% this fiscal ahead of returning to the mid-teens development of previous years.
Declining competitive intensity may possibly also work in banks’ favour, stated Subha Sri Narayanan, director, Crisil Ratings. “Banks are expected to benefit from lower competition as non-banks, grappling with multiple challenges, see tepid growth. With deposit growth outstripping credit growth so far, banks would use the surplus liquidity to wrench credit market share away from some of the largest catchments of non-banks such as mortgages and new vehicle finance,” she stated. Even through FY21, more than half of the incremental retail credit development so far has come from mortgages, she stated.