Mid-size firms, retail lead the charge in credit rebound

Mid-size firms, retail lead the charge in credit rebound

Indian lenders are beginning to see a pick-up in loan demand, with medium-sized firms and retail clients at the vanguard of a visible credit rebound.

Bank credit rose 6.8% in October, compared with 5.1% in the same period a year ago, show the latest figures published by the Reserve Bank of India (RBI).

Outstanding credit amounted to ₹110.5 lakh crore as of October 22, up ₹7 lakh crore in a year.

The pick-up is largely due to the push from government schemes even as large corporates and top rated borrowers continue to rely on capital markets and overseas money hubs where they manage to raise funds at much cheaper rates. India’s weighted average lending rates were at 7.2% in September, according to RBI data.

At the same time, the average rates for triple-A rated five-year corporate bonds were at 6% and at 5.29% for three-year maturity, show Bloomberg data compiled by ETIG.

The latest data on sectoral flow of credit offtake show that lending to medium-sized firms rose 49% year-on-year to ₹1.75 lakh crore as of end September compared with the same period a year ago.

Much of the lending is reckoned to be under the government’s Emergency Credit Line Guarantee Scheme (ECLGS) MSME sector, under which the government provides 100% guarantee to banks in respect of eligible credit facilities extended by it to its borrowers.


In addition, consumer durable loans have risen by 40% compared with 14.9% in the same period a year ago, with borrowers taking advantage of the reduced interest rates. With the government’s renewed thrust on the social sector, lending to infrastructure more than doubled to ₹1,323 crore in September from ₹1,081 crore a year ago.

On the liability side, the pace of deposit pick-up has slowed marginally to 9.9%. But deposit growth still continues to outpace credit growth.

In absolute terms, banks raised almost double the amount of deposits at ₹14 lakh crore than the amount they lent during the period.

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