The first half of the financial year typically sees muted loan growth before the busy season begins with the festive season.
The degrowth in non-food credit on a year-to-date (ytd) basis so far in FY22 has been lesser than in the comparable period in FY21 as the lockdowns during the second wave of the pandemic were more localised in nature. Between March 29 and July 30, 2021, banks’ outstanding loans fell 0.5%, against a 1.1% drop in outstanding loans seen between March 27 and July 31, 2020.
In fact, the trend in loan growth was better in the first four months of FY22 than in the first four months of the pre-Covid year FY20. Between March 29 and August 2, 2019, outstanding loans in the banking system had fallen 0.66%. The first half of the financial year typically sees muted loan growth before the busy season begins with the festive season.
In a report dated August 16, Nomura said that its India business resumption index (NIBRI) took less than three months to cross 100 after the second wave, whereas it had taken nearly 10 months to crawl back towards the 100-mark after the first wave of Covid-19.
Bankers said that while the imposition of lockdowns and other mobility restrictions had hurt disbursements in the first two months of FY22, the recovery was swift. Sandeep Bakhshi, MD & CEO, ICICI Bank, told analysts that retail disbursements moderated in April and May due to the containment measures in place across various parts of the country. “With the gradual easing of restrictions, disbursements picked up in June and July. Credit card spends declined in April and May but improved to March levels in June, driven by spends in categories like consumer durables, utilities, education and insurance,” Bakhshi said. ICICI Bank’s retail loan portfolio, excluding business banking, grew by 20.2% year-on-year and was flat sequentially as on June 30, 2021.
Utilisation of working capital limits has also improved. State Bank of India (SBI) chairman Dinesh Khara said earlier this month that the level of under-utilisation in the bank’s commercial client group dropped to 25% in Q1FY22 from about 30% in the previous quarter.
At the same time, lenders have been cautious while guiding for full-year credit growth. SBI said it expects a 9% growth in FY22 and Khara said credit growth will be a function of the real economy. “We are only waiting for the opportunity to support credit growth, but it will emanate from borrowers and the real economy,” he said.
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