Bank lending accelerates with the recovery of the economy

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Lenders are seeing a pickup in loan demand with demand from midsize businesses and retail borrowers as the economy slowly gets back on track as COVID restrictions ease.

Bank lending rose 6.8% in October from 5.1% in the same period a year ago, according to the latest figures released on Wednesday by the Reserve Bank of India. The outstanding loan amounted to Rs 110.5 lakh crore on October 22, up Rs 7 lakh crore over one year.

The pick-up in loan demand is largely due to the surge in government programs, although large corporations and top-rated borrowers continue to depend on capital and foreign markets where they manage to raise funds at low prices. much lower rates. India’s weighted average lending rates were 7.20% in September, according to RBI data. At the same time, average rates on AAA-rated five-year corporate bonds were 6% and 5.29% for three-year maturities, according to Bloomberg data compiled by the ETIG.

The latest data on sectoral flow of credit drawdowns as loans to midsize businesses increased 49% year-on-year to Rs 1.75 lakh crore at the end of September compared to the same period a year ago. Much of the loans are considered to fall under the government’s Emergency Credit Lines Guarantee Program (ECLGS) in the MSME sector, under which the government provides a 100% guarantee to banks with respect to the facility. of eligible credit that it grants to its borrowers.

In addition, durable consumer loans rose 40 percent from 14.9 percent in the same period a year ago as borrowers took advantage of reduced interest rates. With the government’s renewed push on the social sector, infrastructure loans have more than doubled to Rs 1,323 crore in September from Rs 1,081 crore a year ago.

On the liability side, the pace of deposit collection slowed to 9.9 percent from 10.1 percent in the same period a year ago. But the growth of deposits continues to outpace that of credit. In absolute terms, the banks raised almost double the amount of deposits to Rs 14 lakh crore than the amount they lent during the period.


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