Bank credit jumps 18% in November as retail, Corporate loans pick up

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Bank loans rose nearly 18% in November, compared with 7% a year ago, reflecting buoyant demand from individuals and firms despite rising financing costs since the start of the summer.

Credit to industry continued to register a strong pick-up, with total loans increasing by 13.1%, while personal loans expanded by 19.7% in November, driven mostly by home and auto loans.

Within industrial credit, loans to large industries grew by 10.5% from a contraction of 0.6% a year ago. Credit growth to medium enterprises stood at 29.7% in November as against 37.4% last year. Credit to micro and small enterprises increased to 19.6% from 15.3% a year ago. In November 2021, total credit to industries grew by only 3.4%.

“We are seeing broad-based credit growth at a high level of 18% across sectors like retail, industrials, services,” he said. Suresh GanapathyAssociate Director, Macquarie Capital.

“Current credit growth is also a function of the base effect. For nearly two years Covid, credit growth averaged 6% while deposit growth averaged 11%. So, the base effect should normalize next year and already economists are expecting a slowdown in GDP expansion, hence, we see credit growth at 14-15% and deposit growth at 11%.

In the last two years, or since March 2020, credit off-take has largely overcome the Covid-induced setback, growing at around 25.2%, while deposit growth has reached 27.3% over the same period, a study said. CARE Assessments showed.

Central Bank The data also showed that credit to agriculture and allied activities rose by 13.8% compared to 10.9% in November 2022. Credit to the service sector registered a growth of 21.3% against 3.2% a year ago due to improved credit write-off to non-banking financial institutions, commercial real estate and trade sectors.

“Credit growth is on the rise, with wholesale and retail sales contributing,” he said. Sanjay Aggarwal, Senior Director, CARE Assessments. “The industry’s outstanding debt has grown due to higher working capital requirements fueled by inflation. Corporate loans represent increased bank funding as bond yields have prompted companies to improve their borrowing costs. Despite the significant increase in banks’ lending rates, headline rates continue to be attractive relative to yields charged in the capital markets. ”

Interest rates have risen by 225 basis points since early May.

A basis point is 0.01%.


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