Bank credit drawdown shows rigidity, increases 7% in November: RBI data

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Reflecting the strong pace of business, bank lending rose 6.97% in the 12 months ended Nov. 19, 2021, according to data from the Reserve Bank of India.

Commercial banks’ outstanding credit amounted to Rs 111.62 trillion, compared to Rs 104.34 trillion a year ago. Advance growth was 5.8% year-on-year as of November 20, 2020.

Sequentially, loan growth was 7.1% year-over-year in the previous fortnight (November 15, 2021). Credit expansion has been stable over the fortnight’s reports (with an addition of just Rs 1,157 crore).

Bankers said it was the first fortnight after the peak of the festival season (Dussehra and Diwali). However, credit taking turned out to be rigid. In addition, the reach of credit through the branch network by public sector banks in recent months has helped maintain momentum.

Meanwhile, the rating agency CARE said in a statement that credit growth is expected to be between 7.5% and 8.0% for fiscal year 22. Economic expansion, emergency aid to government guaranteed credit (extended to March 31, 2022), low interest rates, the holiday season and a low base effect are supporting higher lending growth.

The medium-term outlook for the sector looks promising, however, with less stress on businesses and increased provisioning levels in banks.

Bank credit growth improved to 6.8% year-on-year in October 2021, from 5.1% a year ago, down from 6.7% in September 2021 as well as in August 2021.

The personal loans segment is expected to perform well relative to the industry and service segments. However, a new variant of the coronavirus (Covid-19) has emerged as the main threat to the global recovery and credit losses caused by the pandemic could increase if localized lockdown measures persist and changes in consumption patterns could affect negatively some sectors, CARE said.

Deposits increased 9.8% in 12 months to reach Rs 157.79 trillion. The pace has moderated compared to the 10.9% growth recorded a year ago (20 November 2020).

Sequentially, deposits fell sharply by 1.66% (Rs 2.67 trillion) in two weeks, against Rs 160.46 trillion on November 5, 2021.

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