Credit Growth Shows Consistent Improvement: CARE Ratings

The bank credit grew by 7.3% y-o-y for the fortnight ended November 05, 2021) from 5.7% in the year ago period (fortnight ending November 06, 2020), CARE Ratings has said in its latest report.

"The credit growth expanded by 162 bps y-o-y and 45 bps sequentially from the fortnight ended on October 22, 2021. The growth was spurred by the retail credit, driven by the festival season spending coupled with a low base, and pick up of the business activities post the easing of lockdown restrictions across regions in India. According to the Confederation of All India Traders, consumers spent (retail) Rs 1.25 lakh crores this Diwali," the ratings agency has noted.

In absolute terms, credit offtake expanded to Rs.111.6 lakh crore, increasing by Rs.7.6 lakh crore over the last twelve months and by Rs.1.2lakh crore as compared with the previous fortnight (October 22, 2021). Amid the second wave of the pandemic, the bank credit growth has remained tepid owing to the to the risk aversion by both lenders and borrowers and regional lockdowns imposed by states in the earlier part of this year to curb the spread of coronavirus.

It was also impacted by the deleveraging of select large corporates, CARE Ratings has said. "However, following the relaxation in lockdown since June 2021, bank credit growth has improved gradually from 5.7% (fortnight, June 04, 2021) to 7.3% (fortnight, November 05, 2021). The overall non-food credit growth continues to be driven by retail, agriculture & allied activities, MSME and services segments," the ratings agency has said.

The rise in retail credit has also been supported with rate cuts by banks to push retail credit as several banks are offering home loans at record low-interest rate ahead of the festive season. E.g. in October and November 2021, banks like PNB has cut down its benchmark lending rate by 5 basis points to 6.50 per cent and Union Bank of India (UBI) has slashed the interest rate on home loans by 40 basis points in November 2021.